Spinning Review


Pakistani spinning industry: Chances for yarn export markets are limited
by Prof. Dr. Noor Ahmed Memon, Dadabhoy Institute of Higher Education.

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$ 801 billion in 2018; Pakistan’s share is less than 3%.

The spinning sector is the backbone in the ranking of textile production. The rapid increase in spinning capacity due to technological advances has increased the production of cotton and related products substantially.

At present, as per record of Textiles Commissioner’s Organization (TCO), it comprises 517 textile units (40 composite units and 477 spinning units) with 13.414 million spindles and 198,801 rotors installed and 11.338 million spindles and 126583 rotors in operation with capacity utilization of 84.55% and 63.67% respectively. All these factors now contribute about 58% of the country's total exports.

Data from International Textile Manufacturers Federation reveals that in last decade (data available from 2008-09 till 2016-17) Pakistan during this period added 20 times less spindles than China, nine times less than India, and 1.2 times less than Bangladesh. In the same way it installed 62 times less shuttle-less looms than China, 11.5 times less than India and 5.4 times less than Bangladesh.

However, 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.

Production

The production of yarn increased significantly from 3.36 billion kg in 2014-15 to 3.43 billion kg in 2018-19, thus showing an increase of only 2%.

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. 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)

2014-15

13.18

11.08

3,370

2015-16

13.41 11.26

3,397

2016-17 13.41 11.88 3,428

2017-18

13.41

11.29

3,485

2018-19 13.45 11.34 3,431

 Source: Textile Commissioner Organization.

Exports

Export of cotton yarn decreased from 522 million kgs worth US$ 137 billion in 2017-18 to 423 million kgs worth US$ 1.12 billion in 2018-19, showing decline of 18% in terms of value.  Average unit price realization of Pakistani cotton yarn in the international markets is also very low compared to that of its competitors.

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.

Some exporters claim that initially they were unable to reap benefits of rupee depreciation, citing that international buyers were smart enough who were keeping a close watch on the exporting country’s exchange rates and revised prices according to fluctuations in the currency value.

There are two major reasons. First, cotton quality; the deterioration in cotton quality occurs during unsatisfactory storage and handling of seed cotton by growers. 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. Now the chances for yarn markets are limited because the main yarn markets now are China, India, Bangladesh, and Vietnam. Each of these countries has increased their yarn-making capacities and is an efficient producer of yarn. 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)

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

2018-19 423,350 1,125,419 2.60

  Source: Trade Development Authority of Pakistan.

Pakistan’s leading buyers of cotton yarn are China, Turkey, Portugal, Japan and Korea Republic.  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 2018-19 2017-18 2016-17
 China 707,923 869,780 801,407
 Turkey 44,442 72,540 62,550
 Italy 24,554 30,091 21,740
 Portugal 42,808 56,472 49,984
 Germany 11,502 12,346 8,752
 Korea Republic 26,602 34,004 29,136
 Japan 30,854 33,791 30,253
 U.S. America 22,457 13,532 12,055
 Hong Kong 6,086 8,599 5,225
 Belgium 21,693 35,399 34,507
 United Kingdom 2,028 2,054 1,985
 Spain 4,589 5,586 5,537
 All others 179,881 197,725 180,614
 Total 1,125,419 1,371,919 1,243,745

 Source: Trade Development Authority of Pakistan.

Raw material

Cotton is considered as life line of economy of Pakistan. Pakistan is among countries most vulnerable to devastating effects of climate change. Erratic weather in the past two seasons has crippled the country’s already ailing cotton sector.  Cotton crop faces significant challenges vis-à-vis competing crops especially sugarcane. Most important being unfavourable international prices. During 2018-19, cotton production remained moderate at 9.861 million bales, a decrease of 17.5%  over the last year’s production of 11.946 million bales, and 31.5%  against the target of 14.4 million bales. This below expectation performance of the cotton crop was largely due to contraction in the cultivated area on account of less economic incentive to the farmers by 12.1%  to 2,373 thousand hectares compared to last year’s area of 2,700 thousand hectares . The production was also affected by unfavourable weather conditions, particularly the prolonged hot and dry weather that prevailed in the country. In addition, stunting of crop, attack of whitefly, pink bollworm and other pests/insects also hampered crop output. Area, production and yield of cotton are given in Table 4.

Table 4: Area, Production of Cotton

Year

Area
(000 Hectare)

Production
(000 Bales)

Yield
 (Kgs/Hec.)

2014-15

2,961 13,960 802

2015-16

2,902 9,917 581
2016-17 4,489 10,671 730

2017-18

2,700 11,946 753
2018-19 2,373 9,861 707

 Source: Textile Commissioner Organization.

To meet the demands of its textile industry, Pakistan regularly imports cotton mainly from Turkmenistan, Uzbekistan and the US. The country will likely have to import 6 million bales by June next. It will be double what it imported the previous fiscal year. Cotton accounts for 70% of the basic cost of the final garment, so failure of the cotton crop means damage to the country’s economy.  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.

Imports of spinning machinery

The imports of textile spinning machines increased from Rs. 20.76 billion in 2017-18 to Rs. 33.19 billion in 2018-19, thus showing an increased of 60%. China, Italy, Germany and Switzerland have been among top exporters of textile machinery to Pakistan. Imports 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

2018-19

2017-18 2016-17

 Carding machines

5,895 1,487 2,814

 Combing machines

741 960 776
 Drawing /roving machines 3,071 1,815 1,766
 Blow room machinery 1,624 907 1,214
 Other mach preparing text fibres 360 117 100
 Texting spinning machines 11,178 7,969 8,854
 Textile doubling or twist machines 1,467 630 532
 Weft winding machine 586 513 207
 Cone/bobbin winding machines 1,610 1,186 1,349
 Other textile winding machine 2,724 1,753 1,886
 Spindle flyer ring travllers 861 670 575
 Spindles textile machine 461 372 351
 Spinning rings 355 332 287
 Other parts & accessories 2,255 2,057 1,790

 Total

33,188 20,768

23681314

   Source: Pakistan Federal Bureau of Statistics.

Global shipments of spinning machinery

The total number of shipped short-staple spindles increased by about 126,000 units to a level of 8.66 million. Shipments increased for the second consecutive year, but the global trend slowed down. Most of the new short-staple spindles (92%) were shipped to Asia & Oceania where delivery decreased by -2% The most dynamic destinations recorded in 2018 were Korea, Rep, Turkey, Vietnam and Egypt with increases 834%, 306% , 290 %, 285% , respectively. The six largest investors in the short-staple segment were China, India, Uzbekistan, Vietnam, Bangladesh, and Indonesia.

Global shipments of long-staple (wool) spindles decreased from 165,000 in 2017 to nearly 120,000 in 2018. This effect was mainly driven by a drop in deliveries to Asia & Oceania (-48,000 units). This region remained the strongest destination for this type of machinery but deliveries to China and Iran dropped by 60%. The biggest investors were Turkey, Iran, China, Italy, and Vietnam.

Challenges

Pakistani textile industry considered as the backbone of the export sector is facing new issues which should be dealt with promptly. The spinning industry still faces problems despite power tariff reduction of Rs 3 per unit that is insufficient to bring back its competitiveness, but its quality yarn is bringing back global buyers being disappointed by inconsistent and low quality Indian yarn.

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.

Some exporters claim that initially they were unable to reap benefits of rupee depreciation, citing that international buyers were smart enough who were keeping a close watch on the exporting country’s exchange rates and revised prices according to fluctuations in the currency value.

According to statistics provided by the All Pakistan Textile Mills Association (Aptma), the industry is eyeing an export target of US$ 13.3 billion for FY20 with projected investment of US$ 1 billion. The readymade garment sub-sector is again expected to take the lead in overseas shipments.

By FY24, the industry is anticipated to nearly double exports to US$ 25 billion but many of the challenges dogging the sector for the past 10 years have not been addressed. However, some of the problems have been tackled like ending energy blackouts.

Earlier in 2020, the GSP Plus preferential trade status, granted to Pakistan by the European Union, will be reviewed – another area of worry for the stakeholders as they direly need an extension of the facility to boost exports.

On the external front, improvement in the country’s image internationally is the biggest challenge as a damaged perception turns away global buying houses and brands. Getting greater market access to the Asian region, the US, Japan and Australia is also a potential challenge for the textile industry. Efforts of the industry to step up Pakistan’s textile and clothing share in global markets from the existing 1.6% to 3% over the next five years largely depend on facilitation from the government.

References

  1. Textile Commissioner Organization
  2. Pakistan Bureau of Statistics.
  3. Pakistan Economic Survey-2018-19.
  4. Trade Development Authority of Pakistan.

 

 
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