Falling cotton demand now hits processors in Tanzania

Shinyanga. Cotton processors in Tanzania are facing a pile up of cotton yarn, as the crop is facing the export market crisis due to the ongoing trade war between China and the US.

Ginneries are finding it difficult to sell their goods to its main market China due to slowing demands.

JOC Tanzania Textile Company Limited, one of the cotton processing factories based in Shinyanga Region, says it worries about the future of cotton sector, due to the frustrating market situation.

“Despite buying an average of 5,000 tons of cotton lint each years (full capacity demand 8,000-10,000 tons, at least 24,000 tons of raw cotton) the company has not made it this season,” said JOC assistant managing director Mr Marco Kyaruzi.

He said the company is currently having a stock of at least 2,000 tonnes of cotton yarns unexported.

“In previous years, we could only have less than 500 tonnes of yarns at our warehouse, against this amount we have now,” he said.

He then said they have bought at least 4,000 tonnes of cotton lint from two ginners only compared with at least five ginners during previous years.

The processing factory based in Kizumbi Ward, Shinyanga Municipal Council, is also facing several challenges, the biggest being the trade war between the United States and China which cut down the volume of garments exported to the US and hence from Tanzania to China.

Mr Kyaruzi said since its establishment they have employed at least 147 people with fixed and periodic contracts.

JOC managing director Mr Liu said the firm has been operating well since its inception in October 2014, despite several challenges including this year’s huge textile marketing crisis.

“We are currently facing a huge market challenge in the global market, but we are still struggling to operate our factory” he said, adding that this made them cut down demand for cotton lint from ginners and also the amount of the yarns they export.

He mentioned other challenges as transportation due to the establishment of a new policy by the Tanzania Revenue Authority (TRA), which requires transporters to transport cargo in trucks that have the C40 documents.

To get its required input and helping farmers, JOC established training sessions to them so that they could improve their productivity.

Shinyanga Municipal Executive Director Geofrey Mwangulubi said JOC is a very renowned company for helping people round them and was cooperating well with the municipal.

“The company contributes in social responsibilities like providing seminal to farmers and building classes among others,” he said.

Tanzania Cotton Board (TCB) director general Marco Mtunga has confirmed the exports market challenge, adding that the government was taking remedial measures.

“This has been a tough season because of the volatility of prices in the world market,” he told The Citizen.

According to Mr Mtunga, more than 400,000 tons of cotton have been harvested this season.

He said the trade war between the US and China has caused a price fall of the crop in the world market to 61 US cents (Sh1,400) per pound from 77 cents (Sh1,800).

Mr Mtunga added that this was also being reflected in the domestic market, but the government, through the Bank of Tanzania (BoT), has established a mechanism to mitigate effects of the price volatility.

Mr Boaz Ogola, general manager of Alliance Ginneries Limited in Simiyu Region, said ginners and other buyers were unable to buy cotton from farmers.