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

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 Marine CEO quits after review sparks profit warning

Updated 29 min 45 sec ago

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.