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Friday, May 24, 2024

Fall in textile exports put on seasonal slowdown in February 2021

The textiles sector alone attracts around 60% of the export earnings to Pakistan. The overall exports and standalone exports of textiles both, however, decreased around 3% each in February compared to the same month of last year. Analysts say it is a seasonal impact seen for the last six years except for February 2020

The YoY 3.1% fall in textile exports for February 2021, while a 6.7% fall from last month according to the data released by the Pakistan Bureau of Statistics (PBS).

AKD says this is probably due to the seasonal slowdown, and monthly exports may pick up with the new season right around the corner. Analysts claim that this is due to less number of working days in February.

According to Topline Research, “Historically, in the last six years, textile exports in February have fallen in the range of 1-10% (except for Feb 2020).”

According to Topline Research, the fall in volumetric sales by 11.6% led to a fall in export revenue by 3%.

Read More: Is India the answer to Pakistan’s current cotton yarn crisis?

The value-added and non-value-added exports in the textile sector in February 2021 were down 6.4%YoY and 2.2%YoY respectively. According to some people, this is due to the shortage in yarn, however, the yarn exports continue to have a strong run, with a 23.2%YoY increase.

According to PBS, in the value-added segments, readymade garments and bed wear registered a decline of 15.0% and 1.2% respectively while knitwear outperformed the segment with a growth of 13.0%YoY primarily led by price increase (Feb’21: US$43,600/unit compared to US$7,500/unit last year)

This increase according to AKD research is due to local manufacturers capturing the Chinese share of yarn in the US market following the ban on Chinese yarn due to human rights violations. According to AKD, “To highlight, the wedge between China and USA which resulted in the US banning 87% of Chinese cotton crop.”

Meanwhile, in the international market, the cotton prices have gone back towards normalcy, going down 2.7 percent MoM. According to AKD, “Going forward, we expect the cotton price to continue their bull run given stronger demand expectation on vaccine optimism and lower inventory levels.”

Since January, the textile sector has gained 6% amid a stronger result season. Analysts expect earnings to remain high in the short term as the older cotton inventories benefit manufacturers, leading to higher profit margins.

Commenting on cotton growth globally, AKD said, “. Production next season is placed at just over 25.2 million tonnes, and consumption at just over 25.5 million, suggesting a second successive season during which a moderate reduction in global stocks will take place.”

Read More: Pakistan’s cotton sector: innovation and investment

Local cotton prices have increased substantially by 23%/49%, current year to date compared to fiscal year to date, CYTD/FYTD attributing to stronger demand from local manufacturers running at full capacity to fulfill orders. Low production has also caused a shortfall in cotton output which contributes in driving local prices high.