The export of cotton yarn is diverting from US and Hong Kong to China and EU countries, while Cotton Fabrics export is diverting from US to EU, Bangladesh, Turkey and India. According to official statistical analysis, cotton yarn exports depicted a nominal growth of 3.1 percent during FY07 compared with robust growth of 30.9 percent in FY06.
Statistics revealed that the decline in exports to US which is fourth largest export market for Pakistan's cotton yarn is one of the dominant reasons behind this poor export performance. The decline in exports to US was driven by the decline in quantum as the unit prices increased marginally during the period under review.
In fact, US demand for the yarn fell following the slow down in its downstream industry (clothing). This is evident from the fact that US imports of yarn from the world declined by 6.4 percent and 12.4 percent during 2006 and January-May 2007.
However, there was a significant increase in Pakistan's cotton yarn exports to China and EU as is depicted by 26.2 percent increase to China and 31.5 percent increase to EU-27 nation bloc during FY07. The other markets where Pakistan was successful in increasing its exports during FY07 included Egypt, Indonesia, Guatemala, India and Thailand etc.
The diversion of Pakistan's cotton yarn exports from US and Hong Kong to China and EU countries was in line with the international trends. Textile experts observed that China and European countries are the world's major growing markets for cotton yarn. However, cotton yarn prices in China are the lowest in all the world major cotton yarn importing countries. As a result, major fallout of diversion of Pakistan's cotton yarn exports from US to China was the downward pressure on unit values of Pakistan's cotton yarn exports.
Cotton fabric exports declined by 4.3 percent during FY07 as compared to fairly healthy growth of 13.2 percent in FY06. In sharp contrast to FY06 where this healthy growth was mainly contributed (74.2 percent) by increase in quantum, during the outgoing year the reduction occurred entirely because of the plunge in quantum as the unit values increased during this period.
The major reduction in the cotton fabric exports was observed to US market where the category exports declined by 35.5 percent during FY07. Following the slowdown in US clothing industry, the US imports of fabric from the world declined by 4.3 percent and 1.1 percent during 2006 and January-May 2007 respectively.
The major markets where Pakistan's cotton fabrics exports increased are EU, Turkey, Bangladesh, Sri Lanka and India. EU is the largest market for Pakistan's cotton fabrics accounting for around 30 percent of Pakistan's total exports. Importantly, the unit prices in the most of the aforementioned markets are higher as compared to that in the United States.
Consequently, the diversion of Pakistan's cotton fabric exports from US to EU, Bangladesh, Turkey and India resulted in the improvement of unit prices of cotton fabrics. Encouragingly, decline of US $90.6 million in the cotton fabrics during FY07 was more than offset by US $229.5 million increase in synthetic textile exports (mainly fabrics of synthetic textile) during the same period.
Meanwhile, the synthetic textile exports increased by 114.5 percent during FY07 as compared with 33.3 percent decline in the same period last year. According to the market sources, polyester staple prices are stable while the cotton prices are increasing.
As a result, some millers have shifted to polyester-cotton yarn and polyester-cotton fabrics production. Both the quantum and unit prices contributed in this remarkable export growth of synthetic textile. It was important to note that the price difference between Polyester Fibre and cotton has reduced from 0.33 US $/kg from January-FY 2007 to 0.25 US $/kg during April-FY07. However, it increased again to 0.3 US $/kg during end of June-FY07.
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