The recent data by the Pakistan Bureau of Statistics reveals that the Pakistani textile exports have grown 30.4 percent, Year-on-Year in March 2021 compared to the same month in 2020. Similarly, the exports grew 9.8 percent Month-on-Month (MoM) compared to February 2021.
The exports in March were valued at $1.35 billion, showing an upward trend in the sector. According to the data released, the segment-wise value and non-value-added exports registered a rebound of 31.4 percent YoY and 18.9 percent YoY, respectively.
Even though the non-value-added segment saw a boost in exports, which saw a 4.8 percent decline from the preceding month, and cotton cloth increased 23.4 percent, MoM.
According to AKD securities, the main reason behind the jump is the fact that “Local manufacturers have intensified efforts in capturing US textile imports from China after order cancellation from Xinjiang due to human rights violation”.
That is because 80 percent of the Chinese textile industry got their cotton from the Xinjiang province. According to the reports in the international media, the embargo has been placed because of the concern over the alleged use of Muslim minority Uyghurs being used as labor force in cotton production.
While China faces this conundrum, the rest of regional competitors, especially India, for cotton export are also out of the game because of the severity of the ongoing pandemic in the countries.
According to the analysis, the readymade garments and bed wear registered a solid rebound of 22.9%YoY and 43.7%YoY respectively while knitwear outperformed the segment with a growth of 49.6/7.5% YoY/MoM despite PKR appreciation.
Usually, as the local currency appreciates, the products become expensive for the foreign buyers, and as a result, the buyers look for alternatives in the other markets. However, this time as mentioned, it has not been the case. This can again be attributed to “other major exporting regions in Asia experiencing the severity of the third wave of Covid-19 and are undergoing mass lockdowns.”
For the current fiscal year till March, that is, 9MFY21, the textile exports registered an increase of 9% compared to the same period in 9MFY20, while the value-added sector specifically seeing an increase of 15 percent YoY.
According to the AKD analysis, the international cotton prices decreased 1.87 percent MoM in March 2021, signally a return to December 2020 low prices, after hitting the 2-year highest in February 2021.
Domestic prices have soared to PkR12,518/40kg or 10.37% increase MoM showing a trend contradictory to global cotton prices but had started to decrease in the last week of Mar’21.
AKD analysts added, “the removal of import duty on cotton yarn till June 2021 will provide a breather to the downstream textile industry as Pakistan’s cotton crop output falls to an estimated 8.9 million bales for FY21 from 13.2 million bales in FY20, a reduction of 34%.”
The key factors of the cotton prices in the future would be the crop quality and the impact of lockdown caused by the increasing COVID-19 cases in the third wave of the virus.