Egypt seeks to weave cotton renaissance

A picture taken on September 13, 2018 shows an Egyptian farmer working in a cotton field in the Egyptian Nile Delta town of Kafr el-Sheikh. (AFP)
Updated 14 October 2018
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Egypt seeks to weave cotton renaissance

  • Cotton was once Egypt’s main source of wealth in the 19th century
  • Egypt’s cotton union says buyers are even demanding lower prices, without triggering any intervention by the government

CAIRO: Treading carefully among his sprawling green plants in the Nile Delta, Egyptian farmer Fatuh Khalifa fills his arms with fluffy white cotton picked by his workers.
Durable, fine and luxuriously soft, cotton sourced from Egypt has long been seen as the best on the market.
But recent years have been far from smooth for the North African country’s farmers.
“I cultivate 42 hectares (104 acres) and it’s expensive ... while the price (of cotton) is very low,” said Khalifa, who has been growing the premium long-fiber variety for over 30 years.
Profits are “meagre,” he lamented, his head shaded by his cap from the unforgiving sun on his farm in Kafr El Sheikh.
Cotton was once Egypt’s main source of wealth in the 19th century, as the Nile Delta provided fertile grounds for the crop used to make the towels, sheets and robes coveted by Europe’s burgeoning bourgeoisie.
But decades of fierce international competition has diminished returns.
Well-marketed short-fiber cotton — while lower quality than the long-fiber variety — looks good and has increasingly been used by textile giants, dealing a heavy blow to Egyptian players.
The United States and Brazil are now the world’s top cotton exporters, according to this month’s report by the US Department of Agriculture, followed by India and Australia, leaving Egypt trailing far behind.
Back in 1975, Egypt exported $540 million of cotton. By 2016, the sector’s export receipts had fallen to $90.4 million, according to the Massachusetts Institute of Technology.
The popular uprising that toppled president Hosni Mubarak in 2011 dealt a fresh blow to the cotton sector, as political and economic chaos hit production and export chains.
Egypt’s output of cotton fibers fell as low as 94,000 tons in 2013, according to the UN’s Food and Agriculture Organization, down from 510,000 tons in 1971.
Last year brought producers some respite, thanks to rising prices and higher export volumes.
But a trade spat between the US and voracious importer China has seen benchmark global cotton prices fall afresh, as traders take fright over Beijing imposing tariffs.
The commodity was trading at a shade under $0.77 per pound (0.45 kilos) in early October, after reaching $0.95 — the highest level in more than six years — in early June.
In Egypt, the price has dropped back to the minimum guaranteed by the state of some 2,700 Egyptian pounds ($150, 130 euros) per 100 kilos.
Egypt’s cotton union says buyers are even demanding lower prices, without triggering any intervention by the government.
Others offer a different diagnosis of the sector’s ills.
“The drop in prices is not in itself a bad thing,” said Ahmed El-Bosaty, CEO of Modern Nile Cotton, one of the biggest companies in the sector.
Bosaty said the major challenge is boosting productivity.
“A rise in productivity rather than prices would ensure better incomes for workers,” he said.
A cotton expert at the agriculture ministry acknowledged that modernization is key.
“Productivity is rising,” said Hisham Mosaad. But cotton enterprises must invest in mechanization, as the industry is still entirely manual, he added.
Another challenge is that few Egyptian firms make finished products.
“We produce raw cotton for direct export,” said Mohammed Sheta, director of research at the Kafr El Sheikh cotton institute.
Egypt does not have “the factories or the means allowing us to transform it into fabric,” he lamented.
The state has tried to spur activity, boosting areas under cultivation over the last four years by around 50,000 hectares, to more than 140,000 hectares.
In an experimental move, the government in September even allowed the cultivation of short-fiber cotton, but only outside the Delta region.
Experts and farmers remain skeptical, believing Egypt will struggle against foreign heavyweights in the short-fiber market segment.
But many companies see the situation as urgent.
Even though official exports of Egyptian cotton rose 6.9 percent by volume in the three months to the end of May compared to the same quarter of 2017, there was a 57.9-percent fall in consumption of Egyptian cotton at home, due to the domestic market turning to imported products.
At the high end of the value chain, designer Marie Louis Bishara runs one of the few Egyptian firms that produces high quality finished products locally for the international market.
Young men and women work side by side in her modern factory in northern Cairo, in roles ranging from overseeing looms to packing finished shirts.
Promising Egyptian quality, she has dedicated one of her lines to local long-fiber cotton.
“We try to show the world that if you want to make luxury products, you have to use extra long cotton from the Delta,” she said.
Shirts, trousers and jackets stamped “Made in Egypt” have gone from the design stage on her factory floor to grace shop shelves in France, Italy and her home country.


Gulf of Oman tanker attacks jolt oil-import dependent Asia

Updated 15 June 2019
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Gulf of Oman tanker attacks jolt oil-import dependent Asia

  • Iranian threats to close the Strait of Hormuz have alarmed Japan, China and South Korea
  • Japan’s conservative prime minister, Shinzo Abe, was in Tehran when the attack happened

SEOUL: The blasts detonated far from the bustling megacities of Asia, but the attack this week on two tankers in the strategic Strait of Hormuz hits at the heart of the region’s oil import-dependent economies.

While the violence only directly jolted two countries in the region — one of the targeted ships was operated by a Tokyo-based company, a nearby South Korean-operated vessel helped rescue sailors — it will unnerve major economies throughout Asia.

Officials, analysts and media commentators on Friday hammered home the importance of the Strait of Hormuz for Asia, calling it a crucial lifeline, and there was deep interest in more details about the still-sketchy attack and what the US and Iran would do in the aftermath.

In the end, whether Asia shrugs it off, as some analysts predict, or its economies shudder as a result, the attack highlights the widespread worries over an extreme reliance on a single strip of water for the oil that fuels much of the region’s shared progress.

Here is a look at how Asia is handling rising tensions in a faraway but economically crucial area, compiled by AP reporters from around the world:

WHY ASIA WORRIES

The oil, of course.

Japan, South Korea and China don’t have enough of it; the Middle East does, and much of it flows through the narrow Strait of Hormuz, which is the passage between the Arabian Gulf and the Gulf of Oman.

This could make Asia vulnerable to supply disruptions from US-Iran tensions or violence in the strait.

The attack comes months after Iran threatened to shut down the Strait of Hormuz to retaliate against US economic sanctions, which tightened in April when  the Trump administration decided to end sanctions exemptions for the five biggest importers of Iranian oil, which included China and US allies South Korea and Japan.

Japan is the world’s fourth-largest consumer of oil — after the US, China and India — and relies on the Middle East for 80 per cent of its crude oil supply. The 2011 Fukushima nuclear disaster led to a dramatic reduction in Japanese nuclear power generation and increased imports of natural gas, crude oil, fuel oil and coal.

In an effort to comply with Washington, Japan says it no longer imports oil from Iran. Officials also say Japanese oil companies are abiding by the embargo because they don’t want to be sanctioned. But Japan still gets oil from other Middle East nations using the Strait of Hormuz for transport.

South Korea, the world’s fifth largest importer of crude oil, also depends on the Middle East for the vast majority of its supplies.

Last month, South Korea halted its Iranian oil imports as its waivers from US sanctions on Teheran expired, and it has reportedly tried to increase oil imports from other countries.

China, the world’s largest importer of Iranian oil, “understands its growth model is vulnerable to a lack of energy sovereignty,” according to market analyst Kyle Rodda of IG, an online trading provider, and has been working over the last several years to diversify its suppliers. That includes looking to Southeast Asia and, increasingly, some oil-producing nations in Africa.

THE GEOGRAPHY AND THE POLITICS

Asia and the Middle East are linked by a flow of oil, much of it coming by sea and dependent on the Strait of Hormuz.

Iran threatened to close the strait in April. It also appears poised to break a 2015 nuclear deal with world powers, an accord that US President Donald Trump withdrew from last year. Under the deal saw Tehran agree to limit its enrichment of uranium in exchange for the lifting of crippling sanctions.

For both Japan and South Korea, there is extreme political unease to go along with the economic worries stirred by the violence in the strait.

Both nations want to nurture their relationship with Washington, a major trading partner and military protector. But they also need to keep their economies humming, which requires an easing of tension between Washington and Tehran.

Japan’s conservative prime minister, Shinzo Abe, was in Tehran, looking to do just that when the attack happened.

His limitations in settling the simmering animosity, however, were highlighted by both the timing of the attack and a comment by Iranian Supreme Leader Ayatollah Ali Khamenei, who told Abe that he had nothing to say to Trump.

In Japan, the world’s third largest economy, the tanker attack was front-page news.

The Nikkei newspaper, Japan’s major business daily, said that if mines are planted in the Strait of Hormuz, “oil trade will be paralyzed.” The Tokyo Shimbun newspaper called the Strait of Hormuz Japan’s “lifeline.”

Although the Japanese economy and industry minister has said there will be no immediate effect on stable energy supplies, the Tokyo Shimbun noted “a possibility that Japanese people’s lives will be affected.”

South Korea, worried about Middle East instability, has worked to diversify its crude sources since the energy crises of the 1970s and 1980s.

THE FUTURE

Analysts said it’s highly unlikely that Iran would follow through on its threat to close the strait. That’s because a closure could also disrupt Iran’s exports to China, which has been working with Russia to build pipelines and other infrastructure that would transport oil and gas into China.

For Japan, the attack in the Strait of Hormuz does not represent an imminent threat to Tokyo’s oil supply, said Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics.

“Our sense is that it’s not a crisis yet,” he said of the tensions.

Seoul, meanwhile, will likely be able to withstand a modest jump in oil prices unless there’s a full-blown military confrontation, Seo Sang-young, an analyst from Seoul-based Kiwoom Securities, said.

“The rise in crude prices could hurt areas like the airlines, chemicals and shipping, but it could also actually benefit some businesses, such as energy companies (including refineries) that produce and export fuel products like gasoline,” said Seo, pointing to the diversity of South Korea’s industrial lineup. South Korea’s shipbuilding industry could also benefit as the rise in oil prices could further boost the growing demand for liquefied natural gas, or LNG, which means more orders for giant tankers that transport such gas.