Energy crisis, dwindling yarn prices: 30 percent spinning units closed

Some 30 percent of the spinning industry has suspended production because of lingering energy crisis and dwindling yarn prices amidst heavy stocks offloading by its Indian counterpart. Yarn prices are witnessing sluggish trend due to rising uncertainty on New York futures so far as cotton trade is concerned, said one spinner having put operations down with non-supply of gas to its unit.

According to the industry circles, the SNGPL has cut supply to the spinning industry to three days a week from earlier commitment of five days a week. Not only this, they added, the pressure remains low even during the three days of gas supply. Therefore, some 30 percent of the spinning industry have closed production in the country.

These circles pointed out that a steep fall in cotton prices has put the spinners into a troublesome situation. A downward trend in cotton prices resulted into heavy inventories on the part of spinners, which they offloaded with loss over a month back. There were hopes that the prices would get stable in the market, which proved wrong with heavy offloading of stocks by the Indian spinners.

The industry sources said the situation is likely to be dismal until the end of first quarter of 2011-12 and a reversal could only take place with the arrival of fresh cotton crop. Meanwhile, the worries of the cotton growers are piling up fast with downward price trend in the international market. They fear losses ahead in a situation when Pakistan is likely to produce 10 percent more cotton crop during current season.

It may be noted that Pakistan is expecting record cotton production of over 15 million bales in the 2011-12 crop year as farmers have cultivated a wider area after domestic prices doubled a year ago. Pakistan had achieved record cotton production of 14.6 million bales in 2004-05, but the output fell sharply after that until now. The government was targeting a sowing area of 8.5 million acres, up by 8 per cent from the last year, working out a plan to prevent pest and virus attacks, and ensuring seed availability.

Pakistan was the fourth largest producer and third largest consumer of cotton. Flood reports are though hovering around but still the sector experts believe that any flood like situation may cause a loss to not more than 10 percent of the crop area. Therefore, there would be no major change in price trend in the near future.