$550 million profit from giant US companies


The misuse of cotton contract terms by giant cotton companies in the USA, citing operational and logistical problems, has dealt a great blow to the Turkish yarn industry, so to speak. The loss of the yarn industrialist, who still could not receive the cotton they bought at high prices from the companies in question last year, exceeded 550 million dollars. While it was stated that hundreds of spinners were victims, it was stated that there were still companies that could not receive their product. While the sector players started working to take legal action, the Ministry of Commerce took action to compensate the damage.

The subject came up at the board meeting of Istanbul Textile and Raw Materials Exporters’ Association (İTHİB), which was held in Kahramanmaraş at the weekend. Making a statement to the press after the meeting, İTHİB Chairman Ahmet Öksüz reminded that Turkey is highly dependent on foreign countries for cotton. Stating that the country with the highest purchases is the USA, Öksüz said, “Purchasing contracts are drawn up in these transactions. Regarding these contracts, US sellers did not load on time. This delay is not 1-2 weeks. 8-9 months. In these sales, they made such a unilateral contract that you have to buy it even after 8-9 months. Moreover, it was tied at the time when its weight was 2-3 dollars, the goods that were 9 months overdue still did not arrive and the price decreased to 1.5-2 dollars. The loss due to the price difference is around 550 million dollars. They were short-sold. Turkey’s source is gone. There is no penalty. We are fighting right now. We are also meeting with the Ministry of Commerce. We need to act together. We need to sit at the table with the USA saying, ‘We do not make such contracts, if you want to sell to us, you will make your contract like this’.

6 companies under the spotlight

One of the companies that suffer from this situation is Narteks Tekstil, based in Kahramanmaraş. Mustafa Narlı, Chairman of the Board of Directors of the company, stated that they, as Narteks, made purchases at $3.20 in October-November last year, and said, “According to the agreement, the cotton we bought was to be loaded in March. We are about to enter October and cotton has decreased to $2.20 and 4,500 tons of the 20 thousand tons of cotton we have purchased has not yet arrived. Not just me, hundreds of companies are in this situation,” he said. Narlı, who is also the Assembly President of Kahramanmaraş Commodity Exchange, continued as follows: “We have been trading with the same contract for 30 years. There was no problem. But this year they set up such an event. They showed us the undelivered goods as if they had been received and delayed it with various distraction tactics. They knew that the price of the new crop would drop this year. They made a short sale. Some of the victim companies even found ships from the USA. This time, they said there is no internal transportation. They found an internal transport, and this time they found another excuse. Now we as spinners form a union. Compensation of 550 million dollars may not be possible, but the contract needs to be changed for the next period.” Stating that they also examined the examples of various countries on this issue, Mustafa Narlı said, “We were at the ministry last week. We asked for support, they said they would be with you. There is still a lot of cotton that has not arrived. This is a huge destruction. I have a loss of 4.5 million dollars and we don’t know how long it will be. Everyone is a victim right now and we expect support from the ministry.” he said. According to the information we received from industry representatives, US companies include Allenberg, Cargill, Olam, Dreyfus, Cofco and Reynard Cotton. These companies are among the companies that have the biggest say in the world cotton trade.

“We conceded 3 goals”

Ertuğrul Tanrıverdi, Deputy Chairman of Ensar Tekstil’s Board of Directors, is one of the names very close to the subject. Tanriverdi, who knows the US cotton market very well and also trades from the country, explained that when buying cotton from the USA, they normally buy 2-3 months in advance and they always act in this way. Ertuğrul, who is also a member of the Kahramanmaraş Chamber of Commerce and Industry, said, “Last year, things were good. In January, I bought cotton for 3 dollars with a March load. In return, I sold my yarn. The cotton that was supposed to arrive in April did not come, prices rose. This time, I fulfilled my responsibilities so that my business would not be damaged, and bought from inside at a higher price. In other words, we both bought the cotton twice and also endured the financial burden of it. What’s more, we’re left with higher-priced cotton. We conceded three goals,” he said. Tanriverdi stated that the reasons for the unilateral abuse of trade, which has been going on for years, are operational difficulties and logistics He explained that developments such as costs were shown. Tanriverdi said, “After the epidemic in the USA, there was a problem in land transportation and workforce. Container prices also came from 2 thousand 500 dollars to 10 thousand dollars. As such, they were not loaded. If he’d paid $10,000, he could have loaded it. As Turkey, we have incurred high costs for on-time delivery. We even did air cargo. While we were doing these, the companies that were our interlocutors did not. Delays reached 9 months. The same cotton that I bought for 3.5 dollars is now 2.6-2.7 dollars. There is serious damage. There is a multiplier effect. Also, cotton fell very hard last year as it turned from the July board to the December board. At that time, we all had high-priced goods in our hands. If those goods had arrived on time at that time, our loss could have been minimized. But unfortunately, there is no such thing at the moment,” he said.

Action has been taken to compensate for the damage

According to the information given by Ertuğrul Tanrıverdi, international cotton trade is carried out according to the rules of Liverpool-based The International Cotton Association (ICA). Stressing that this is a statute, not a law, Tanrıverdi said, “Everything we write in the contract can override the statute. Liverpool rules have nothing to do with late loading. Here, it is said, why can’t you put an article about late loading? We can’t, because the world cotton trade is in the hands of 5-6 big companies and these are the companies that manage the world cotton. These are powerful companies such as government with operations in different fields. Small companies have no chance to be offended by these companies. “If you add a liability for delay to my contract, I won’t sell,” he says. We can’t write this in the contract. The Department of Commerce has now contacted US officials. We are looking at what can be done both to compensate for our losses and to prevent such incidents from happening again,” he said. According to TUIK, 568 million dollars of 2.4 billion cotton imports were made from the USA last year. This year, cotton imports increased to 2 billion dollars in the January-July period, while imports from the USA increased to 735 million dollars.

“Precautions should be taken against unfair competition”

İTHİB President Ahmet Öksüz, who mentioned the recent problems in the sector at the event held in Kahramanmaraş, where 50% of Turkey’s cotton yarn production takes place, said that the production of the textile sector in Turkey has reached a size of 49 billion dollars, and that the total size, including ready-made clothing, is 78 billion dollars. dollar He said it’s up to his level. Stating that the sector, which has such a strong production structure, is exposed to unfair competition against imported products, Öksüz noted that they have reached a close period in trade in the textile industry, which sees an increase in exports every month. Öksüz said, “We held a meeting with the ministry last week. We are going through a period in which Turkey must use its internal resources to the maximum. But we are under the pressure of dumping export from Asian countries such as Uzbekistan, Turkmenistan, Pakistan and India. At the same time, the measures that protect the domestic producer due to origin deviation are rendered ineffective. If urgent measures are not taken in the face of these problems, a decrease in production, which has reached a giant size of 78 billion dollars, will be inevitable. The yarn industry is protected by Additional Customs Taxes (IGV) between 5 and 8 percent. Unfortunately, the cotton yarn industry is the least protected product group among all the products in which IGV is applied. The IGV average is around 25 percent among all sectors. In this context, increasing the additional customs duties of the cotton yarn industry, which is one of the most important raw materials of the textile industry, is among our most important expectations. Our Ministry of Commerce also approaches the issue very meticulously.” According to the information Öksüz gave, textile industry imports, which were 5.6 billion dollars in the January-July period last year, increased to 8.1 billion dollars in the same period this year.