Textile gloom

LAHORE: An interaction with textile players revealed the flow of orders has reduced to a trickle. Exporters said a more worrying aspect for the exporters was that the foreign buyers have put the dispatch of orders on hold.

Moreover, against normal payments time of 45 days, they now delay payments up to 90 days.

This has created a financial crunch for the exporters as they are on huge stocks involving their resources and are getting payments of shipments after three months.

One apparel sector exporter said that his average exports per month were Rs600 million. He said he has not received payment for three consignments. He said with Rs1.8 billion stuck up with foreign buyers and shipment of around Rs400 million manufactured apparel consignments put on hold, he can no longer operate his unit.

It was found that the entire apparel sector is facing the same ordeal. Small apparel exporters have been constrained to close shop for the time being as they have consumed all their resources and bank limits dispatching their export goods.

Banks are also not enhancing their limits until they come up with a solid mortgage, which they do not have.

Among the larger and medium exporters, those that consumed their profits in real estate or other ventures are in trouble. They are cutting even necessary costs like laying off their experienced human resource.

There are however few prudent entrepreneurs that visualised the trouble that was coming.

They retained their high earnings of last year and the profits were of such high magnitude that they have tolerated the impact of recession, stalled orders and late payments.

Among all textile sectors, the spinning mills are in deepest trouble.

They also minted money on lower cotton prices and subsidised power and energy last year coupled with higher demand in local and global markets.

Spinners have entered the real estate market in large numbers. The additional income provided them with an opportunity to further strengthen their real estate portfolio.

Cotton prices hit the roof for most part of this year. The power and energy rates were enhanced. To make matters worse, the demand for yarn declined to a trickle.

We have seen that in October, where yarn exports from Pakistan declined by 60 percent compared with exports in October 2021. It is a global phenomenon, as Indian cotton yarn exports also dipped by over 40 percent in October 2022.

The trouble that our spinners face today is that they have spun yarn from expensive cotton, while the market is not willing to pay an amount that could cover their cost of production. They are sitting on huge unsold stocks.

To add insult to injury, the cotton rates have dipped by 50 percent in the last few weeks. Those that booked cotton at higher prices from abroad will again produce cotton at unsellable prices. They mostly do not have the reserves to fall back on. They invested textiles incomes elsewhere. Industry players reveal that the spinners are operating at 50 percent capacity. Few have temporarily closed their units.

Garment exporters now realise that gloom would last for some time. They expect exports to dip by 30 percent in January. They are hoping for new orders, otherwise they would be forced to get rid of a large number of their skilled workers.