Pakistan : Yarn Price Hike Hits Export Contracts

There are fears that many exporters may run into default and lose their markets in coming months if no immediate action is taken, exporters said.

"We had been facing high input cost but the recent increase of up to 16 per cent in cotton yarn and 10 to 12 per cent in polyester yarn prices has made it difficult for us to fulfil our export contracts agreed about six months ago," a leading readymade garment exporter said.

During the last fortnight cotton yarn prices (22 single) jumped from Rs410 per 10 pound to Rs485 per 10 lb, showing an increase of 15 to 16 per cent in prices. The 24 single cotton yarn prices also rose from Rs420 to Rs500.

Similarly, polyester yarn (24 single) price has surged from Rs50 per 10 pound to Rs55, indicating a rise of 10 to 12 per cent. The polyester yarn prices rose due to unprecedented increase effected by the local manufacturers in polyester staple fibre prices, the exporters said.

The sudden increase in the local PSF prices has been made after 14 days (on February 1) of the last hike of Rs3 per kg (from Rs60 to Rs63), textile exporters claimed. The textile manufacturers and exporters termed the price hike unjustified and detrimental to the country's exports.

The report of short crop during the third picking has been instrumental in abrupt rise of cotton yarn prices as the raw cotton prices in the local market are about to touch a record level of Rs3,000 per 40 kg.

"The situation has suddenly become uncertain," the chairman, Pakistan Bedwear Exporters Association (PBEA), Aziz L. Jamal, told Dawn. He said a large number of exporters were facing difficulties in fulfilling their export contracts.

He said during the signing of these contracts no exporter could even think that raw cotton prices would touch the record high level, particularly when the government's estimates for cotton crop were above 10.5 million bales.

However, slowdown in phutti arrival during the last two months has raised fears that the crop would be below 10 million bales, whereas the industry consumption capacity over the past couple of years has increased due to balancing, modernization and replacement (BMR) along with large scale expansion.

Former chairman, PBEA, Shabir Ahmed, said about two years back the government had managed to keep raw cotton prices stable and this helped increase textile exports. However, he was apprehensive about achieving the $10 billion target if textile exporters are hindered at this juncture.