Spinning Review


Pakistani spinning industry still facing problems
by Prof. Dr. Noor Ahmed Memon, Dadabhoy Institute of Higher Education.

The spinning industry still faces problems despite power tariff reduction of Rs 3 per unit that is insufficient to bring back its competitiveness, but it's quality yarn is bringing back global buyers being disappointed by inconsistent and low quality Indian yarn.

During the last year, the Indian government tried to boost its yarn and fabric exports by providing subsidies on the export of these two items. Later, it announced further subsidy on a few focused markets that included Pakistan. Chinese shifted their orders from Pakistan to the Indian spinners. Some large fabric manufacturers also preferred cheaper Indian yarn over the expensive domestic product.

Pakistani yarn manufacturers are however not prepared to export yarn at current global yarn rates as it is not commercially viable to match Indian rates that are subsidized by their government.

Pakistan’s spinning industry has for the last decade been operating at much higher power tariff than regional economies and still remained competitive. The reason for the high tariff was dependence on high cost furnace oil for power generation.

The textile industry is the major industrial sector which plays an important role in the economic growth of the country. It continues to be the largest industry of Pakistan based on the local raw material and commands the strongest comparative advantages in resources utilization. The industry has expanded significantly since independence and now developed into one of the strongest export based industrial sub-sector.

Pakistan has emerged as one of the major cotton textile product suppliers in the world market, with a share of world yarn and cotton fabric trade of about 30% and 8% respectively, maintaining the sector as a backbone of industrial activity for the country. The annual volume of total world textile and clothing trade is more than US$ 755 billion; Pakistan’s share is less than 3%.

The spinning industry of Pakistan functions in a competitive but free environment as long as procurement and use of raw materials are concerned. Scarcity of crop led the sourcing of international cotton in Pakistan, which began a decade ago. Today, the nation approximately sources 4 million bales from the international markets and produces close to 12 million bales domestically.

Since spinning is the beginning of value chain, all value added processes of weaving, knitting, processing, garments and made-ups are dependent upon this process. The effect of a sub-standard yarn by spinning segment can go right across the entire value chain.  Pakistan's spinning sector caters not only to the requirements of the domestic industry but also about one third of the total production of yarn is exported to different destinations.

The rapid increase in spinning capacity due to technological advances has increased the production of cotton and related products substantially. The Textile Commissioner Organization reports that there are 517 textile units in operation (40 composite units and 477 spinning units) with 13.41 million spindles and 199,000 rotors installed and 11.29 million spindles and 127 thousand rotors in operation with capacity utilization of 83% and 84% respectively. All these factors now contribute about 55% of the country's total exports.

The production of yarn increased significantly from 2.13 billion kg in 2014-15 to 2.2 billion kg in 2017-18, thus showing an increase of 3% per annum.

 The production of yarn share in coarse counts is 47.1%, medium counts 23.7%, whereas fine and super counts 5.4% and mixed polyester 23.8% respectively. China and India are producing both cotton and MMF yarns and fabrics at a comparatively lower energy cost. The textile industry in Pakistan is facing the highest energy cost in the region. Installed capacity, working and production of yarns are given in Table 1.

Table 1: Installed Working Capacity and Production of Yarn
                                                                             (000 Spindles)

Year

Installed
Capacity

Working
Capacity

Production of yarn (Million Kg)

2013-14

12,310

11,000

3,324

2014-15

13,268

10,231

3,360

2015-16

13,268

10,508

3,406

2016-17 13,269 11,083 3,428

2017-18

13.41

11.29

3,485

 Source: Textile Commissioner Organization.

Exports

Export of cotton yarn increased from 456 million kgs worth US$ 1.24 billion in 2016-17 to 522 million kgs worth US$ 1.37 billion in 2017-18, showing an increase of 10%.  Average unit price realization of Pakistani cotton yarn in the international markets is also very low compared to that of its competitors. The average unit price of cotton yarn decreased from US$ 2.98/kg in 2015-16 to $ 2.63/kg in 2017-18.

The average unit price realization of Pakistani cotton yarn in the international markets is very low compared to that of its competitors. There are two major reasons. First, cotton quality; the deterioration in cotton quality occurs during unsatisfactory storage and handling of seed cotton by growers. Most of the ginners indulge in malpractices involving a mixture of varieties and grades, low standards of ginning and addition of excess moisture just before pressing lint into bales. This results in the production of contaminated yarn that sells for a much lower price.

The second reason for low unit value realization is the product mix of Pakistani cotton yarn. More than 70% of the total yarn production is that of course and medium count yarns. In yarn exports, this percentage is about 99%, and therefore, coarse and medium counts fetch a lower price compared to fine and superfine counts that ultimately manifests in low unit value realization. Moreover, the share of other high value-added yarns like dyed and melange, or core spun yarns are also very small in terms of total exports volume. Exports of cotton yarn from Pakistan are given in Table 2.

Table 2: Exports of cotton yarn

Year

Quantity

Value

Unit Value

(000Kgs)

(US $ 000)

($/ Kg)

2013-14

663,895

1,997,338

2.75

2014-15

671,293

1,849,389

2.74

2015-16 423,624 1,264,922 2.98

2016-17

455,345 1,243,745 2.73

2017-18

521,959

1,371,919

2.63

  Source: Trade Development Authority of Pakistan.

Pakistan’s leading buyers of cotton yarn are China, Bangladesh, Turkey, Portugal, Hong Kong and Korea.  Country-wise exports of cotton yarn from Pakistan are given in Table 3.

Table 3: Country wise Exports of Cotton Yarn
                                                                             Value: US $ 000

Country 2017-18 2016-17 2015-16
 China 869,780 801,407 836,105
 Bangladesh 83,602 83,669 100,827
 Hong Kong 35,399 34,507 52,564
 Turkey 72,540 62,550 42,778
 Portugal 56,472 49,984 37,094
 Korea 34,004 29,136 30,633
 Japan 33,191 30,253 28,359
 U.S.A 13,532 12,055 16,568
 Italy 30,091 21,740 16,372
 Vietnam 5,914 10,081 11,485
 Bahrain 9,318 7,466 8,428
 Other 124,685 70,644 53,879
 Total 1,371,919 1,243,745 1,264,922

 Source: Trade Development Authority of Pakistan.

Raw material 

Pakistan is among the leading cotton producing countries, however from the last few years, the  cotton production is on the downward side and declined drastically to 11.85 million bales in    2017-18. For the current fiscal year  the Federal government has estimated cotton production at 11 million bales against a total requirement of around 15 million bales.

Pakistan imported 458 thousand metric tonnes of cotton during 2017-18. USA and  India accounted for 76% of the total cotton imports. The unit value of the US cotton and Indian cotton is almost the same indicating strong competition between these two supplying countries.  However Egypt and Turkmenistan garner the highest unit values, while accounting for less than 3% of the total cotton imports. The imports of cotton during 2017-18 is given in Table 4.

Table 4: Country wise Imports of Cotton 2017-18

Country Quantity
(Metric Tonne)
Value
(Million US$)
Unit Value
(US$ / Met Tonne)
 U.S.A 188,403 339 1,799
 India 146,159 259 1,771
 Afghanistan 40,269 48.5 1,206
 Brazil 22,778 38 1,669
 Mexico 13,585 21.7 1,604
 Turkmenistan 6,039 13.3 2,210
 South Sudan 8,005 11.5 1,435
 Egypt 3,041 7.7 2,540
 Other 30,260 49.8 1,640
 Total 458,539 788.5 1,725

 Source: Trade Development Authority of Pakistan.

Imports of spinning machinery

The imports of textile spinning machines and parts decreased from Rs. 23.68 billion in 2016-17 to Rs.22.22 billion in 2017-18, thus showing a decline of 6%. China, Italy, Germany and Switzerland have been among top exporters of textile machinery to Pakistan. Import of textile spinning machinery and parts are given in Table 5.

 

Table 5:  Imports of Textile Spinning Machines and Parts
                                                                      Value Rs. in Million

Machines / Parts

Unit

2017-18

2016-17

Quantity

Value

Quantity

Value

 Carding machines

No

152 1,486,272 389 2,813,833

 Combing machines

No

80 959,046 56 776,100
 Drawing /roving machines No 295 1,815,260 290 1,765,961
 Blow room machinery No 117 906,674 134 1,213,685
 Other mach preparing text fibres

No

40 117,063 278 999,728
 Texting spinning machines

No

1,040 7,968,789 937 8,853,940
 Textile doubling or twist machines No 479 630,401 245 531,682
 Weft winding machine No 144 512,714 38 207,302
 Cone/bobbin winding machines

kg

393 1,185,777 636 1,349,345
 Other textile winding machine

kg

189 1,753,587 298 1,885,613
 Tops & flats card clothing

kg

182,222 721,240 154,284 584,313
 Other card clothing

kg

176,095 647,376 152,385 539,018
 Part accesory mach text fibre

kg

20,933 83,528 16,213 57,019
 Spindle flyer ring travllers

kg

115,928 669,666 116,443 575,110
 Spindles textile machine

kg

119,298 371,967 131,821 351,207
 Spinning rings

kg

98,896 332,522 87,370 287,541
 Other parts & accessories No 563,480 2,057,070 530,782 1,789,917

 Total

--

-- 22,219,407

--

23681314

   Source: Pakistan Federal Bureau of Statistics.

Global shipments of spinning machinery

Shipments of new short-staple spindles increased for the first time since 2013. The level of short-staple spindles increased to 1.65 million spindles. Most of the new short-staple spindles (95%) were shipped to Asia, whereby shipments rose by almost 24% year-on-year. Thereby China, the world’s largest investor of short-staple spindles, experienced an increase of 34%, whereas deliveries to Bangladesh and Vietnam decreased by 33% and 39%, respectively. Shipment to Indonesia strongly increased last year (+ 135%). The six largest investors in the short-staple segment in 2017 were China, India, Uzbekistan, Bangladesh, Pakistan, and Indonesia.

Shipment of open-end rotors rose by 24% to a level over 788,000 rotors in 2017. About 85% of a worldwide shipment of open-end rotors was destined for Asia. Thereby, delivery to Asia increased by about 15% to nearly 674,000 rotors. However, China, the world’s largest investor in open-end rotors, increased its investments by only 6% in 2017 when countries like Iran, Brazil, Uzbekistan, and Japan saw 2 to 4 times more deliveries compared to 2016. The world’s second and third largest investors in 2016 were Turkey and India.

Challenges

Pakistani textile industry considered as the backbone of the export sector is facing new issues which should be dealt with promptly. The textile industry crumbling under high energy prices, struck up refunds and tight monetary policy is facing tough competition from India, Bangladesh, Vietnam, Thailand and other states in the foreign market. Therefore, the government should take serious initiatives to safeguard local industry which is the highest foreign exchange earner and the largest urban employment provider.

The All Pakistan Textile Mills Association (APTMA) needs to enhance the quality of its products, upgrade the technology used, and encourage effective Research and Development (R&D) in order to compete internationally. However, APTMA argues other factors such as high interest rates and cost of inputs, non-conducive government policies, and non-guaranteed energy supplies hinder their competitiveness.

While several manufacturers have upgraded their production units by installing technologically advanced machinery and equipment, the trend has failed to pick up momentum across the entire spinning sector.

During the past two years, Pakistan has a steep plunge in imports of textile machinery once again. Textile machinery imports for FY18 clocked in at US$ 325 million which is the lowest since the bottom of US$ 252 million in FY09.

Pakistan is among the leading cotton producing countries, however from the last few years it's cotton production is on the downward side and declined drastically to 12 million bales in 2017-18.

According to the report, Pakistan, which is the world's fourth-largest cotton producing country, falls short of around 4.0 million bales a year to meet the local demand of nearly 16 million bales.

State Bank of Pakistan (SBP) in a recent report observed that with adequate availability of raw materials in the country, Pakistan could have excelled in global synthetic textiles markets such as Vietnam, Bangladesh, and Cambodia, which are leading exporters of synthetic textiles following China.

Internationally cotton is now 30% of the total fibre consumption and manmade fibre and filament are now at 70%, while the situation domestically is quite the opposite.

References

  1. Textile Commissioner Organization
  2. Pakistan Bureau of Statistics.
  3. Pakistan Economic Survey-2017-18.
  4. Trade Development Authority of Pakistan.

 

 

 
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