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Summary India banned cotton exports with immediate effect as a move to conserve supplies for local mills.
India has banned cotton exports as a move to conserve supplies for local mills. According to their local estimates, India has already exported 8.5m bales of cotton, 0.1mn bales higher than its FY12 target of 8.4mn bales.This ban from the world’s second largest cotton exporter would ignite fresh upside in international cotton prices amid persistent demand from cotton-hungry China.Any consequent upside in international cotton prices would bode positive for textile sector of Pakistan as surplus crops (14.3mn bales having arrived) amid lower demand from value added sector on account of energy shortages, would be exported.According to our estimates exports of additional 1mn cotton bales would have an incremental impact of US$351mn, at current prices.Moreover higher international cotton prices would also lend support to already falling textile exports of Pakistan.This would also be positive for local textile manufacturers on account of expected improvement in yarn prices which usually move in tandem with cotton prices and inventory gains as they have built up their inventories at lower levels.
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