Low imports lift cotton prices

Spot prices of cotton rose by around 3 per cent this week because of lower imports in the wake of bullish international prices.

Bengal Desi surged to Rs 4,218 a quintal today compared with Rs 4,106 a quintal last week, while V797 jumped to Rs 4,499 as against Rs 4,387 last week. According to industry sources, cotton imports have declined heavily in the past few weeks as imports have turned costlier compared with domestic cotton.

"An export oriented unit (EOU) pays no duty for imports, but for a local mill, the duty works out to 14.6 per cent, making imported cotton costlier," said Shirish Shah, partner of Bhaidas Cursondas & Co, a trading house in Mumbai.

An EOU would import Shankar 6 at Rs 18,500 a tonne, while the imports of the same variety would cost a local mill Rs 21,500 a tonne, said Shah. Prices in New York gained 3-4 cents a pound following reports of a visiting Chinese delegation's deal to buy cotton from the US.

China, which imported almost 50 per cent of the US cotton last year, was expected to see a fall in imports by 1 million tonnes. But, the current spate of deals between China and the US is set to boost the Chinese imports further, with industry sources adding that the Asian nation is likely to buy a majority of its cotton requirement from the US.

The Indian cotton exports may touch 50 lakh bales (1 bale = 170 kg) this year, up 6.38 per cent compared with the previous year's figure of 47 lakh bales.

The country has already exported around 20 lakh bales to China and 8 lakh bales each to Pakistan and Bangladesh.

Meanwhile, demand from domestic mills is subdued as they had bought in excess in the past. The current surge in prices is a temporary one and it would end soon, feel traders.