KARACHI: Cotton prices went slightly down during previous week in local market. There was a boom in international cotton market due to Chinese buying. A shortfall of 1 million bales is reported for India.
According to the All Pakistan Textile Mills Association (APTMA) 150 textile mills have been closed in the country. There is a decrease of 17% in textile products. Pakistani exporters; however, got a positive response in Heimtextil exhibition held in Germany. Pakistan Yarn Merchants Association has demanded that L/C facility for import of textile raw material should be restored, immediately.
In the domestic cotton market, the price of cotton saw a relative decline during the last week as textile spinning mills also refrained from buying high-priced cotton due to which the business volume remained very low.
Textile spinners’ banks are unable to open L/Cs of imported cotton due to which the spinners started panic buying during the last two weeks but because of to a sharp price increase they restricted the purchase due to which the price of cotton which was Rs 21,000 to 22,000 per maund decreased by Rs.1,000 to Rs.2,000 per maund to reach Rs.20,000 per maund.
During the last two weeks, the price of cotton had increased by Rs 4,000 to Rs 5,000 per maund. There is little room for more growth. According to APTMA, currently around 150 textile spinning mills have been closed, and if the situation continues, more mills will be closed also.
The country will have to import cotton in a large quantity after the alarming decline in cotton production. Due to the issues in opening L/Cs in the country it is first time in the textile history of the country that APTMA wrote a letter to the US Embassy and requested to take up the issue of loan approval for cotton import before the American government.
In a letter written to US Ambassador Donald Bloom, APTMA urged him to take up the case with the US government for sanctioning the loan.
APTMA has requested a soft loan of $2 billion to import 3.5 million bales. The cotton will be imported from the US.
Government of Pakistan is moving from country to country for assistance, but this is the first time that the APTMA, the largest organization of the country, has also requested financial assistance from the United States, which is beyond comprehension. According to reports, some export orders have been signed in Heimtextil exhibition.
In Sindh province, the price of cotton was in between Rs 16,500 to Rs 20,000 per maund after a decrease of Rs 1,000 per maund. The price of Phutti was Rs 6,000-9,500 per 40 kg. In Punjab, the price of cotton fell by Rs 1,000 to Rs 2,000 per maund and was in between Rs 19,000 to Rs 20,000 per maund. The price of Phutti was Rs 6,500 to Rs 10,000 per 40 kg. The prices of Banola, Khal and oil prices remained stable.
The spot rate committee of the Karachi Cotton Association kept the spot rate unchanged at Rs 20,000 per maund.
Naseem Usman, chairman of Karachi Cotton Brokers Forum, said that the international cotton markets were generally booming. New York cotton’s rate of Future Trading for the month of March is around 87 US cents per pound, after fluctuating.
In India, there was a slight increase in cotton prices due to which the Cotton Association of India indicated a decrease of about 9 lakh bales in cotton production, which is 3.30 million bales after decreasing. The bullish factor in Afghan cotton was dominant due to the purchase of Pakistani mills.
Meanwhile, Pakistan’s textile exports are expected to improve after receiving export orders worth $500 million from the global textile exhibition Heimtextil held in Germany. However, it is the need of the hour that government should overcome the shortage of raw materials and increase the prices of yarn. It should resolve the issues faced by the textile industry so that refunds of over Rs 150 billion can be paid to the exporters as soon as possible in order to reduce unemployment and to deal with economic depression.
Pakistan’s textile exports are expected to improve with $500 million worth of export orders received from the ‘Heimtextil’. However, it is a need of hour that the government should overcome the shortage of raw materials and increase yarn prices.
Pakistan Textile Exporters Association (PTEA) Pattern Chief Khurram Mukhtar, while talking to media, has said that more than 250 textile companies in Pakistan participated in the exhibition and Pakistan is expected to get export orders worth $500 million in the next three to four months.
He said that the government should take advantage of this opportunity to make the refunds as soon as possible to eliminate the shortage of working capital faced by the exporters. According to Khurram Mukhtar, the government issued refunds of Rs 25.9 billion last week but refunds of Rs 50 billion are still pending. He added that Rs 150 billion deferred refunds of Sales Tax, Income Tax, DLTL, TUF, and Mark-up Support Scheme are still pending.
Meanwhile, the textile sector is going through a severe crisis due to skyrocketing energy prices as 150 textile mills have already been shut down in the last five months.
According to the details, a total of 150 spinning and weaving textile mills in the country went closed in the last five months due to an increase in the energy crisis in Pakistan, which results in the unemployment of at least 2 million people.
While criticizing the economic strategy of the government, the mill owners said, “Production cost of the industry has increased by 100% under the current government.”
They complained about the increase in energy prices, saying “in the previous govt era, the electricity rates were Rs18 per unit, which have now increased to Rs 36, petrol rate is hiked from Rs 150 to Rs 245 per litre.
The mill owners said that gas is not available to the industries; letters to credit (LCs) are not being opened for import due to which raw materials are not available for the textile industry.
The government has to take immediate notice of the situation; otherwise, more textile mills will be closed down.
Moreover, according to APTMA, textile industry is running out of cotton due to which there is a risk of closure of mills. Exporters are returning orders due to uncertainty and availability of raw material as per their need.
Pakistan this year suffers not only due to lower exports, but there will also be a permanent shift of orders to other countries and it will be difficult to take back these orders in future.
A dollar spent on cotton imports generates $3 in exports. The estimated cost of ten million bales of cotton at today’s prices is $4 billion, which would generate at least $12 billion in exports. The country’s textile sector used 15 million bales last year, indicating that imports would need to be around 10 million bales to maintain exports at last year’s level.
Pakistan’s economy is largely dependent on textile exports for foreign exchange and employment. A troubled international economic situation and devastating floods have pushed the country’s economy to the brink of collapse.
APTMA says that since banks are willing to extend credit to only small and limited lines of credit for companies that are direct exporters, it excludes 80 percent of the core industry and ignores the fragmented structure of the industry. Raw material (cotton) is not available to the entire sector.
Further, in December 2022, exports of textiles and clothing decreased by 16.47% to $1.35 billion, which was $1.62 billion during the same month in 2021.
According to the details, there has been a decline in total exports for four consecutive months, this decline shows that the government is facing difficulties in achieving the export target during the current financial year, as a result of which the pressure is mounting on country’s foreign exchange reserves.
The continuous decline in textile and clothing exports since the last four months is due to increase in energy costs, delay in refunds and depreciation of rupee.
Exporters believe that the main reason for the decline in exports is exchange rate instability. Besides, due to the government’s removal of duty drawback on local taxes and levies, the export sector is facing cash flow problems.
However, no statement has been issued by the Ministry of Commerce regarding the reason for the continuous decrease in exports, since Commerce Minister Naveed Qamar has been making continuous foreign visits after assuming the office of the Ministry.
According to the data of Pakistan Bureau of Statistics, in December 2022, exports of ready-made garments recorded a negative growth of 7.92 percent in terms of value, but its volume increased by 50.5 percent, while exports of knitwear in terms of value recorded a negative growth of 7.92 percent. A decrease of 19.54 percent and an increase of 24 percent in quantity, bedwear recorded a decrease of 17.77 percent in terms of value and 22.74 percent in terms of value.
Apart from this, a decrease of 14.05% in terms of value and 13.09% in quantity was recorded in exports of towels, while a decrease of 13.97% in exports of cotton fabrics and 19.42% in terms of value was recorded.
Moreover, a decrease of 60.71% in the exports of cotton yarn and 19.09% decrease in other yarns except cotton yarn were recorded, while there was a decrease of 49.92% in the exports of made-ups other than towels and a decrease of 26.04% in export of tents, canvas and tents were recorded.
Copyright Business Recorder, 2023
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