Textile sector braces for polyester price hike

KARACHI: An expected increase in polyester yarn rates on rising oil prices may hit textile exports in the near-term, though the impact may be limited due to a recovery in global demand and competitive pricing, industry officials said.

Javed Bilwani, chairman Pakistan Apparel Forum, said polyester prices were going up not only for Pakistan but for the entire world and an increase in its prices would not affect the country’s textile sector in a significant way as an increase in the cost of doing business would be passed on to buyers.

“Textile sector mainly uses cotton for producing goods and polyester’s share is less than that of cotton.”

Pakistan exported almost $11 billion worth of textile goods in the first seven months of current fiscal year compared to $8.76 billion in the same period last fiscal, showing more than 24 percent growth. Despite the challenges posed by the Covid-19 pandemic, textile sector has been staging a recovery following easing local and international restrictions that allowed the industry to resume normal operations amid a rising global demand.

However, the textile sector is expecting an increase in polyester yarn rates due to high oil prices, indicated a study by Pakistan Crediting Rating Agency (PACRA).

Also, according to the report, freight charges have also surged four-fold over the last 12 months. Pakistan produces natural as well as man-made fibers. Among naturally produced fibres, cotton is the most common textile raw material, while polyester is the main synthetic/man-made fiber.

Over 70 percent of the Polyester Staple Fiber (PSF) is supplied to the textile value chain, i.e., the spinning sector. The remaining PSF is majorly supplied to the PET packaging industry for making plastic bottles. The mix of natural and synthetic fibers varies depending on the type of yarn produced. Pakistan’s average polyester Industry size is recorded around Rs109 billion in last financial year excluding recycled PSF. The industry which suffered on account of the Covid-19 pandemic during FY20, recovered and expanded by around 40 percent in FY21 compared to last year.

The study notes that cotton production during current season has improved considerably due to favorable weather conditions and arrivals stand at 7.4 million bales.

However, the country remains reliant on imports to meet the remaining demand and the rising international cotton prices will put pressure on the sector’s margins. Greater reliance on imported raw material also increases currency risk exposure due to exchange rate volatility. Pakistan’s polyester demand took a steep dip in FY20, registering a fall of 26 percent year-on-year, owing to a halt in business activities and reduced demand from the textile sector. However, the demand has recovered since then.

The growth of the polyester fiber market is largely being propelled by surging demand for face masks due to Covid-19 outbreak, the expanding textile industry, booming consumer interest in the apparel sector, and rapid urbanisation in emerging countries. The country’s demand is majorly met through local sales, while some portion is catered through imports. Over the recent years, imports have remained relatively stable.