LAHORE: Yarn exports from Pakistan will continue to increase until the
value added sector rises to challenge other Asian cloth exporters as
China is moving away from yarn production because of high cost…Textile
experts point out that surge in yarn exports this year is not a
temporary phenomenon but it is just the start and more yarn will be
shipped in coming years…They say China, the largest yarn
producer and consumer, will opt out of yarn production due to increase
in cost. Historically, countries looked for cheaper source of cotton
yarn once their per capita income crossed $2,000 because labour cost
hampers production of low value added products at competitive rates…Per
capita income of China has already crossed $3,000. China with over 100
million spindles (a spindle is a machine that spins yarn which is later
woven for various textile uses) produces more than double the yarn than
that produced by India, the second largest producer of yarn with around
45,000 spindles…Installed spindles in Pakistan are 12 million,
of which 10.5 million are working. China this year stopped production
on 12 million spindles which is equivalent to the total installed
capacity of Pakistan…Another factor reducing yarn production in
China is the decision of the government to give preference to food
production over cotton. So it is converting cotton-sown areas and has
become the largest importer of cotton in the world which has further
increased the cost of yarn…Pakistan’s clothing sector this year
was forced to pay international price for cotton yarn after a surge in
its exports. As a result, the government slapped quota on yarn exports
last month. However, its prices increased further because spinners
preferred reducing production instead of selling yarn at what they
claim below cost…Talking to The News, All Pakistan Textile
Mills Association Chairman Ejaz Gohar said tinkering with the free
market economy would be disastrous for the entire textile sector of the
country. With cotton rates above Rs5,000 for 37.5 kg and bank mark-up
in the range of 16-18 per cent, he said, it was not feasible for the
spinners to sell yarn at last year’s prices when cotton was 60 per cent
cheaper…He said investment in the textile industry almost dried
up in the past three years. “This is an appropriate time to increase
spinning capacity to meet expected high demand of Pakistani yarn in the
global market.”..Two top clothing exporters each with exports of
over $200 million tend to agree that the value added sector will have
to face the reality of high yarn prices…Pakistan Hosiery
Manufacturers Association former chairman Adil Butt said instead of
bickering over high yarn prices the clothing exporters should press
foreign buyers to offer better prices. He said no reasonable buyer
would refuse to adjust prices in accordance with the increase in yarn
rates which was a global phenomenon…He said top quality yarn
was available in the domestic market, though prices were high, adding
his units were operating 24/7 and buyers had agreed to increase prices…MI
Khurram, another clothing exporter, lamented the clothing sector missed
an opportunity to make higher exports by forcing the government to
impose restrictions on yarn exports. He said that resulted in further
increase in yarn prices as many spinners curtailed production instead
of selling yarn at a loss…He said he got 5-10 per cent increase in prices of various clothing categories from foreign buyers after increase in yarn rates…Pakistan
Hosiery Manufacturers Association former chairman Shahzad Azam Khan,
however, said the increase in yarn prices was engineered by the
spinners. He said the Trade Development Authority of Pakistan fudged
data to impose 30 per cent higher ceiling on yarn exports compared to
what was agreed between the cloth exporters and finance and textile
ministers. “Now good quality yarn is not available even at very high
rates,” he said”
Date:2/21/2010
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