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Dubai to Host First Cotton Trading Centre

DUBAI - The Dubai Cotton Centre or DCC plans to start operations during the third week of April, following a three-month delay due to economic uncertainty, an executive told Reuters. The centre will be a redistribution and trading post for cotton from Uzbekistan en route to Asia.

Storing large quantities of cotton in Dubai will help save up to 40 days of shipping time for Asian importers, Ashok Das, head of commodities at DCC, said on Monday.

At present, Uzbek cotton for the same buyers is transported via rail to the Iranian port of Bandar Abbas. Shipments from there to Asia are often subject to delays, Das said.

“Ships from Bandar Abbas are not very regular but once the cotton is stored in Dubai it will take seven to ten days to ship the cotton to the majority of Asian countries,” Das said.

Cotton to be traded at the DCC will be shipped directly from Bandar Abbas to Dubai for storage, Das said.

Last year the DCC, a trading arm and a fully owned subsidiary of the Dubai Multi Commodities Centre or DMCC, clinched an import deal with Uzprommashimpeks or UPM to supply the DCC. UPM is one of the largest cotton exporters in Uzbekistan, which is the world’s third-largest cotton exporter.

The economic crisis has dampened global cotton demand, leading the DCC to lower its expectations for the volume of trade it wants to see at the new centre. The DCC has cut its trading target 25-30 per cent to 50,000-60,000 metric tonnes for the season ending in September, Das said.

“We will revise the numbers again if demand drops further,” Das said. “In general cotton trading has been in a state of uncertainty amid the economic crisis as textile demand drops with disposable income.”

The DCC will sell the cotton at the worldwide benchmark price of around 50 cents per pound, but plans to boost the price to improve margins once demand recovers, Das said. Customers for the 50,000-60,000 tonnes will be mainly in Bangladesh and the cotton will be routed through the Jebel Ali port in the emirate of Dubai.

The DMCC is in talks with DP World, one of the world’s largest marine terminal operators, about storage facilities for the cotton and details will be finalised before commercial operations start, said Das.

Eventually, Dubai may establish futures contracts for cotton, Das said, although those plans were still at a preliminary stage. Dubai government created the DMCC with the aim of making the city a regional hub for commodities. The DMCC holds a majority stake in the Dubai Gold and Commodities Exchange.