Spinners, Exporters Battling It Out in Egypt
May 10, 2011 One of the events that defined the cotton industry in 2010 was India’s ban on cotton exports. It could be déjà vu again in 2011, not just in India, but also in Egypt. Things should be fine for the next few weeks, because the Federation of Cotton Exporters (FCE) has signed an agreement with domestic spinners and weavers to not accept any new exports orders until June. However, many local spinners and weavers have already shut down their operations, especially in the private sector, due to high raw materials prices and weak demand.
Demand is slowly weakening across the globe, lessening the upward pressure on prices and prompting some Egyptian farmers to consider alternative crops. However, inclement weather can strike with virtually no warning, as seen last year in places like China, Australia and Pakistan. This year’s global crop could be lessened if, for example, drought conditions persist in Texas, which supplies half of the cotton produced in the United States, the world’s top exporter.
FCE has warned government officials about the grave consequences of any type of export ban, particularly on contracts that have already been executed, saying the damage such a decision would do to Egypt’s future attractiveness as a trading partner would be irreparable.
According to Ahmed El Dabbah, export manager for the Arab Trade & Investment & Cotton Trading Co. (ATICOT), the four main types of Egyptian cotton can be split into two groups:
• Giza 80 and 90, which are comparable to Greek or Uzbeki cotton
• Giza 86 and 88, which are long/extra-long staple, comparable to U.S. Pima
“The ban on exports should apply only to the first group,” El Dabbah says. “The cotton in the second group is not needed by our spinners, because the yarns that they produce don’t require long or extra-long staple cotton. Spinners in China and India, on the other hand, are in need of these long staple cottons because they produce such very good yarns.
“If the government puts an export ban on the second group, the Egyptian cotton industry will lose two things: the excellent business reputation it has built over many years, and a huge amount of money. We are a country that needs revenue now to build an improved economy, and the cotton business is worth more than $500 million to Egypt. The damage to Egypt’s reputation as a reliable business partner as well as the economy will be the very serious consequences if the government bans all cotton exports.”
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