Several aspects of Pakistan’s textile industry

by Zhao Xinhua

Exports hit decade high of USD 2.3 billion in March

Pakistans exports in March reached a decade-high of USD 2.3 billion with monthly figures showing growth yearon-year and over the previous month， commerce adviser said.

“Ministry of commerce is glad to share that according to provisional figures， in March 2021 our exports increased to USD 2.345 billion. This is an increase of 13.4 percent over February 2021. It is the monthly highest in last 10 years，” Adviser to Prime Minister for Commerce and Investment Razak Dawood wrote on Twitter.

“This is also the first time since 2011 that exports have crossed the USD 2 billion mark for six consecutive months.”

However， commerce adviser termed the annual growth as misleading because the last years lockdown kept the industrial wheel extremely slow.

For the 9-month period of July-March of the current fiscal year， exports increased 7 percent to USD 18.6 billion as compared to USD 17.4 billion in the corresponding period last year， according to the ministry of commerces data.

Exports are expected to get an upset due to shortage of cotton， the main industrial input of textile industry that accounts for more than 60 percent of total exports.

The government is uncertain about giving a go-ahead to cotton and yarn import from India， the worlds largest cotton producer. Analysts said textile industrys growth is tied with cotton import from India to keep up momentum of textile exports from the country.

Although some analysts said banning Indian cotton would not deprive Pakistans textile industry of the raw material， they still believe cross-border trade is more cost-effective.

“Eventually we will be importing from China and Europe as we are doing it right now，” said Tahir Abbas， head of Research at Arif Habib Limited.

However， there are two differences when it comes to cost-effectiveness of Chinese and European cotton， Abbas said. One is transportation time and cost involved in importing cotton from neighbouring India vis-à-vis international import. Secondly， there is four to five percent difference in cotton prices.

In July-March period， imports grew 12 percent to USD 39.2 billion compared to USD 34.8 billion during the corresponding period last year. The growth has come from increase in import of raw material as well as import of wheat， sugar and cotton， commerce adviser said.

Pakistan to import cotton from Central Asian states

Pakistan has decided to import cotton from the Central Asian states through Torkham border， it was learnt on 11 March.

According to sources， the Ministry of Commerce has sought the ECCs approval to import cotton from Afghanistan and Central Asian states， including Turkmenistan and Uzbekistan.

As per the data released by the Ministry of National Food Security and Research， cotton production in the country would most likely clock in at 7.7 million bales this year， as against the consumption of 12 million bales. Cotton ginners， on the other hand， estimated 5.5 million bales for the year.

Sources said that the government is mulling to import cotton and yarn from India.

According to sources， APTMA is currently exerting pressure on the government， asking it not to allow cotton and yarn import from India as some millers have allegedly hoarded the commodity owing to which rates were high in the market.

Exporters stop yarn sales due to depreciating dollar

The exporters in Pakistan have halted yarn sales as the falling dollar prices have led to higher availability of the raw material at cheaper rates in the domestic market， revealed sources from the value-added sector.

The industry is also hopeful that the measures being taken by Pakistan to normalize relations with India could allow cheaper cotton yarn imports from across the border. Spinners who produce yarn believe that the raw material was expensive due to costly cotton imports.

Reports suggest that against annual predicted consumption of minimum 12 million bales， the Ministry of National Food Security and Research expects only 7.7 million bales production this year.

However， cotton ginners have given the lowest production estimates of only 5.5 million bales for this year. According to the Pakistan Bureau of Statistics， Pakistan has imported around 688，305 metric tonnes of cotton and yarn while there is a minimum shortfall of six million bales. A gap of about 3.5 million bales is present that the government would need to fill through imports.

Due to the rising decline in cotton production， users were forced to import from United States， Brazil and Uzbekistan. Imports from India， however， would be much cheaper and would arrive in Pakistan in three to four days. Pakistan Apparel Forum Chairman Jawed Bilwani had earlier said that unavailability of cotton yarn and sudden decrease in the value of rupee against the U.S. dollar can harm efforts made by the value-added apparel and home textile segments.

Yarn exporters who sold their products at the rate of Rs160-161 are now facing declining profits. There are daily fluctuations in the exchange rate with the dollar standing at around Rs157 in the inter-bank market. The dollar lost 7.5pc in value since August against the Pak rupee.

An exporter of finished textile products said that the recent decline in the yarn prices is neither significant nor there is any guarantee that the prices would remain stable as it is mainly a result of a sudden drop in the dollar prices.

Previously， the spinners had opposed yarn imports from India， saying that trading with the country shouldnt be normalized unless disputed issues including imbalances in trade are resolved. Imports from India remain higher than exports from Pakistan.

However， as the prospects of gradual restoration of bilateral trade ties with India have increased after a deal to maintain peace at Line of Control， traders now remain hopeful of importing cheap cotton and cotton yarn from across the border.

Pakistani denim makers begin to make use of hemp

Three Pakistani textile makers say they have begun producing new denim fabrics blending cotton with hemp. Artistic Milliners （AM）， Karachi； U.S. Denim， Lahore； and Farooq Spinning Mills， Faisalabad， all say they have embarked on denim production that incorporates hemp， according to South Asia Investor Review.

After establishing a hemp program last year， the Pakistani government has said hemp can be a sustainable replacement for cotton production， which is in decline in Pakistan as farmers shift to other crops due to low prices and a lack of high-quality seed. Pakistan was once the worlds largest exporter of cotton yarn， and the fourth biggest cotton producer in the world behind China， India and the USA.

AMs IntelliJeans collection features cottonized hemp sourced from China for now. The line is being marketed as both sustainable and naturally antimicrobial. A global conglomerate that originated as a vertically integrated denim manufacturer， Artistic Milliners operates a consumer experience center in Dubai and an innovation incubator in Soho， New York City， as well as a manufacturing facility in Los Angeles.

U.S. Denim is a fabric mill supplying denim to the fashion industry through partnerships with such leading international brands as Levis， H&M and Marks & Spencer. Its collections focus on sustainability and feature recycled and biodegradable fibers such as hemp. Other products use recycled cotton， elastane and polyester； aniline-free dyestuff； and water-safe dyeing methods.

Backing the move toward hemp textiles in Pakistan， scientists at Agriculture University in Faisalabad are creating sustainable blends incorporating hemp.

Pakistan approved hemp farming and processing under government control last September， suggesting the sector could result in a USD 1 billion market over the next three years. Farms for cannabis production are being established in Jhelum， Peshawar， Chakwal and Islamabad.

The government is controlling hemp production for now， but plans call for letting private businesses and farmers enter the market at a later date.

Pakistan textile profitability increases by 32 percent

Pakistans textile sectors profitability increased significantly by 32 percent year-on-year during the first half（July-Dec.） of FY21 primarily due to an increase in exports， improvement in other income， and decline in finance cost.

According to data shared by Topline Pakistan Research， the countrys overall textile revenues increased 12 percent year-on-year during the period under review， with exports rising 8 percent year-on-year in USD terms and 13 percent Year-on-year in PKR terms.

Toplines data regarding the listed textile composite sector is based on profitability analysis of 21 companies that represent 82 percent of the sectors market capitalization.

The increase in pricing and depreciation of PKR/USD by 4.6 percent year-on-year helped mitigate the impact of rising cotton prices， as gross margins remained largely unchanged at 16 percent. However， gross profits increased by 9 percent year-on-year.

According to Topline Research， local cotton prices increased 7 percent year-on-year to average Rs 9，154 per maund during 1H FY21. This was mainly due to 34 percent year-on-year decline in cotton production.

Other income of sample companies increased 22 percent year-on-year mainly due to remeasurement gain booked on Gas Infrastructure Development Cess （GIDC） as per the IFRS， and exchange gain recorded on net foreign asset exposure.

Finance costs also declined 14 percent year-on-year during 1H FY21， mainly attributable to lower interest rates as SBP reduced policy rate by a cumulative 625 bps to 7.0 percent.