Production halted as textile, auto demand falls

Two companies announce partial shutdown of operations to cope with falling demand

KARACHI:

Pakistan’s economy has continued to face hardships as two more industrial units announced that they would observe a partial shutdown in the face of thin demand for textiles and automobiles.

In its notification to the Pakistan Stock Exchange (PSX) on Monday, Shahzad Textile said owing to lesser market demand for yarn and other economic adversities, its board of directors decided to shut down units No 1 and 4 from September 29, 2023 for an indefinite time period.

“However, unit No 2 and 5 will remain operative,” it clarified.

“We believe that this strategic decision will lead to several long-term benefits for our company. Our board of directors and management team have thoroughly evaluated the associated risks and benefits, and we are confident that this action is in the best interest of our company and its shareholders.”

The closure of yarn-making units for an indefinite period may spark further economic trouble as textile is the country’s largest export earner that fetches around 60% of the total export proceeds.

The notification suggests that global economic slowdown and recession in Europe are taking their toll on Pakistan’s textile businesses.

Read Economic woes leave textile industry in tatters

In addition, a significant increase in the cost of production amid soaring energy tariffs has made Pakistan uncompetitive in international markets, according to industry officials.

In another development, Agriauto Industries announced that it was going for a partial closure of its auto parts manufacturing plant in the current month.

“Due to reduction in production volumes of our major customers, the company will be observing partial shutdown during the month of October 2023,” an Agriauto notification read.

“Agriauto Stamping Company…,the wholly owned subsidiary of the company, will also observe partial shutdown in October 2023 owing to the (same) reason.”

The auto parts vendor, however, did not elaborate whether it would reduce working hours or the number of working days.

AHL Research auto analyst Muhammad Abrar Polani said as consumer affordability worsened due to a tough economic environment, the demand for automobiles shrank, resulting in a trickle-down impact on the demand for auto parts.

Higher interest rates have also reduced the demand for auto financing, causing a drop in auto sales. Earlier, the availability of financing at affordable rates played a pivotal role in promoting the auto industry.

Published in The Express Tribune, October 3^rd, 2023.

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