The country’s reliance on the textile sector for exports increased to 56 per cent of total exports compared with 53 per cent in fiscal 2010, according to Federal Bureau of Statistics. The growth has primarily been driven by an astounding 90 per cent increase in cotton prices during the year which impacted the entire textile chain, according to a BMA Capital research note.
Record textile exports rose 35 per cent to $13.8 billion in fiscal 2011 from last year’s $10.2 billion.
Raw cotton and yarn volumetric exports fall
Exports of raw cotton witnessed an 11 per cent decline in volume to 142,000 tons but registered the largest increase in value of 84 per cent to $196 million, says the note. A drop of nine per cent in Pakistan’s cotton production to 11.7 million bales due to devastation caused by floods combined with an increasing demand from spinners were the primary reasons for the decline in exports of the commodity, says the note.
Similarly, greater demand for yarn at home and limited availability of cotton led to a drop in exports by 15 per cent to 533,000 tons. However, an increase in prices by a significant 79 per cent resulted in yarn exports registering an increase of 53 per cent to $2,185 million.
Furthermore, the value added textile products also saw a 27 per cent growth in exports to $6.3 billion during the year with the export prices revised upwards following the cotton price trend.
Textile companies like Nishat Chunain and Nishat Mills are set to benefit from the growing exports, which will be reflected in their fiscal 2011 earnings, says the note.
Sector to be under pressure in fiscal 2012
Cotton prices have recently witnessed a steep decline to Rs6,000 per maund from highs of Rs14,000 per maund touched in the previous season. An optimistic global cotton production forecast in addition to higher interest rates in China are expected to slow economic growth and reduce imports in the country, adds the note.
The outgoing financial year is expected to post substantial earnings growth for the export-oriented textile companies in particular, however, inventory losses in the first quarter of fiscal 2012 cannot be ruled out, says the note. Nishat Mills and Nishat Chunian’s stock price fell 3 per cent and 9 per cent on a monthly basis, reflecting investor sentiment.
Published in The Express Tribune, July 21st, 2011.
COMMENTS (4)
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That's bad. Since March, the price of cotton in international market has crashed by more than 50%. If the trend continues, Pakistani exports will be very low for this fiscal year.
With power shortages, crumbling infrastructure, I do not see export numbers even meeting last years figures.
Exports of textile products constitute over 60% of the total exports of Pakistan.
Pakistan should capitalize on the textile sector, meanwhile, also tap other markets for exports.
Pity. We should be moving away from our long-standing dependence on raw cotton and cotton textiles.