Global Market: Pakistan Cotton Mills May Continue To Sign A Large Number Of American Cotton Contracts

According to the data of Pakistan Cotton Growers Association (PCGA), as of January 31, 2025, the cumulative marketed volume of Pakistan seed cotton will be about 854000 tons of lint, a year-on-year decrease of about 34.0%. Among them, Pakistan's domestic cotton mills purchased about 775000 tons of lint, and the gins' unsold inventory was only about 75000 tons.

According to the judgment of some international cotton merchants and Pakistani cotton related enterprises, considering that the listing of Pakistani new cotton in 2024/25 is nearing the end, and some cotton farmers and cotton processing enterprises have completed a large number of transactions in unofficial channels in order to avoid 18% sales tax, the actual cotton output in Pakistan in 2024/25 will be slightly higher than 900000 tons, with a year-on-year decrease of 25-30%.

An international cotton merchant said that although Pakistan had signed up 435200 tons of American cotton in 2024/25 by January 23, 2025, accounting for about 21% of the total net contracted exports of American cotton, the industry generally believed that Pakistani cotton textile enterprises/traders would still purchase American cotton, Brazilian cotton, Australian cotton and African cotton in a large scale in the first half of 2025. The reasons include the following:

First, Pakistan's cotton textile and clothing exports have shown a rapid growth momentum in recent months, and the demand for medium and high grade, medium and high index cotton is relatively strong. However, due to the weather factors in 2024/25, the proportion of Pakistan's domestic cotton with high spinnability and high-quality cotton has declined significantly, and can only rely on imported cotton to supplement. According to statistics, the number of Pakistani cotton products imported by the United States in November 2024 was 240 million square meters, an increase of 21.0% year on year and 5.0% month on month. From January to November 2024, the United States imported 2.33 billion square meters from Pakistan, an increase of 8.2% year on year.

Second, the Trump government imposed a 10% tariff on Chinese imports, and China took precise and systematic measures to counter it, which led to a certain amount of US/EU orders for medium and high-end, high value-added cotton textiles and clothing to accelerate the transfer to Pakistan, India, Vietnam and other Southeast Asian countries. As the order yarn count and product quality requirements have been significantly improved, Pakistan's domestic cotton can not meet the demand of textile and clothing enterprises, and instead expand the import of cotton and cotton yarn.

Third, the signing and shipment of Brazilian cotton in 2024 has entered the middle and later stages. In 2024/25, American cotton will not only have a peak sales period from December to March, but also the output will increase significantly. At the same time, the lint quality indicators such as western cotton region, southeast cotton region, and central and southern cotton region will perform well, which will match the demand of Pakistan cotton mills.

Fourth, the short position rate of major contracts of ICE cotton futures is high, and the market atmosphere is empty. In addition to the pressure of Trump's tariff "blackmail" performance and the Federal Reserve's postponement of interest rate cut, the short-term probability rate of ICE fell below the previous 65.01 cents/pound, which led to the price and quality advantages of American cotton/Brazilian cotton compared with Pakistan's domestic cotton.