Textile exports in jeopardy as cotton goes north

KARACHI: Surging cotton rates in local and global markets are feared to hit Pakistan’s textile exports hard as a huge increase in cost of production would drastically compromise their competitiveness, industry officials said on Saturday.

Spike in the cotton prices comes at a time when textile exports are on an upward trajectory, while the largest exporting sector struggles with high cost of energy, shortage of gas, rising shipping charges, etc.

Pakistan’s textile exports in the first quarter of this fiscal year rose 27 percent to $4.420 billion compared to $3.469 billion in the same period of the previous year.

Cotton rates surged to Rs16,000/maund (37.2kg) in Sindh, the highest in the season, whereas they are also witnessing a rising trend in Punjab and Balochistan, according to cotton arrival reports.

Because of the high cost of cotton, the textile sector has started pondering over how to deal with the situation.

The textile millers in Faisalabad region recently huddled up to find a solution to maintain the growth momentum in textile exports.

According to cotton brokers, high prices of cotton are putting textile mills into tight financial spot as they are compelled to buy cotton on credit, creating debt.

On the other side, prices have also gone up in world market and this hike has become more pronounced for Pakistani importers due to a massive depreciation of rupee against dollar in the last several months.

Pakistan is more or less bound to import the natural fibre to meet textile industry demands as local production is not sufficient to feed the industry.

Cotton price in India has also reached the highest level whereas they are also on the rise in USA, Brazil, China, etc. World cotton markets are expected to remain on the higher side in the days to come.

Pakistan registered the lowest cotton production in the last season when it fell to its lowest level in 30 years to 5.5 million cotton bales.

The government has set a target of over eight million bales this year.

Brokers believe that production numbers would be higher than the last year; however, it might fall short of target.

For the current fiscal year, the government has set a target of $20 billion for textile goods exports, which stood at $15.5 billion in the last fiscal year.