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Global Watch: Pakistan'S Textile Export Will Drop Sharply

2022/11/24 18:24:00 0


According to foreign reports, Pakistan's textile exports will decline sharply, or at least according to the latest monthly trade report of Pakistan's Statistics Bureau, we can think so. According to the report of the Bureau of statistics, Pakistan's exports of most medium and low-grade textiles showed a double-digit decline from July to October this year. If the export volume of clothing is not stable, the country's textile exports will show negative growth.

At present, the decline of Pakistan's textile exports is spreading. It may not be long before garment exports will "surrender". At least, cotton imports from July to October this year look like this. According to the Statistics Bureau of Pakistan, Pakistan's cotton import volume from July to October this year just exceeded 1 million bales, the lowest level since September December 2019. However, at that time, Pakistan imposed a very high tariff on cotton imports. Therefore, excluding this stage, cotton import from July to October this year is the lowest level in more than a decade.

At the same time of cotton import decline, Pakistan's flood has led to a sharp decline in cotton production by nearly half, and the current production forecast has dropped to the level of 4.5-5.5 million bales. If the current average import level of 250000 bales per month continues, the annual cotton import volume will not exceed 3 million bales, the lowest since fiscal year 2016, when Pakistan's domestic cotton production was 10 million bales. For most of the past decade, Pakistan consumed 12.5-13.5 million bales of cotton, and cotton imports accounted for 40% of the total demand in recent years. However, factory cotton consumption is likely to decline significantly in the current fiscal year, due to a significant reduction in domestic cotton production and a significant decline in imports.

In addition to supply side problems, cotton prices and downstream demand are also important reasons for the decline in cotton imports. First, with international cotton prices plummeting by nearly 50% from May to November, Pakistan's textile industry began to re sign contracts in order to obtain lower prices. Since August 2022, Pakistan's average monthly cotton import price has exceeded that of the international market in the same period, and the average import price has been lower than the international cotton price before.

Now it seems that Pakistan's industry, betting on a sharp rise in international cotton prices, is now overwhelmed by raw material inventories at peak prices, as the recession has begun to spread across major export destinations. Therefore, although the domestic cotton supply decreased significantly, the production of gauze did not rely more on imports, but continued to decline.

For 2023, once the domestic cotton market is over and winter is over, Pakistan's cotton import is likely to pick up, which will more clearly reflect the specific degree of economic recession in export destinations. However, even if the monthly average cotton import volume doubled than now, it is difficult for the annual import volume to reach the peak of 5 million bales in recent two years.

At present, it is inevitable that Pakistan's textile export volume will decline sharply in 2023 fiscal year. Whether the decline in demand will immediately turn into the export price drop of low-end products still needs to be observed. Last time when the international cotton price continued to be below 80 cents, Pakistan's textile export value was stagnant (2015-2020 fiscal year). How this time will be? It will take time to prove.

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