Low cotton price propels Pakistani yarn exports

1. From January to September 2023, Pakistani textile and apparel exports amounted to $11.913 billion

In 2023, Pakistani textile and garment exports have faced headwinds but managed to persevere. The average monthly export volume has decreased by 10-30% compared to last year. However, in the second half of the year, as overseas brands and retail clothing inventories gradually decrease, new orders for textile exports increase slightly, indicating signs of stabilization and recovery in the textile export sector. According to the latest data released by the Pakistan Bureau of Statistics, the total textile and garment exports in September 2023 amounted to approximately $1.36 billion, a decrease of $94 million compared to the previous month. Nevertheless, it is still above the average monthly export level for this year. Among them, knitted fabrics accounted for $346 million, bed linen accounted for $233 million, and ready-made garments accounted for $251 million, with a combined export share of 60.92%.

From January to September, Pakistani textile and apparel exports accumulated a total of $11.913 billion, a decrease of approximately 18 percentage points compared to the same period last year. Its share in Pakistani total exports fluctuates around 60%, slightly lower than last year but still maintaining a significant position in the industry. The latest population census in Pakistan shows that the population has increased to 250 million, with an additional 35 million people in the past six years. The population growth rate has surpassed Pakistani economic growth rate, and the low-cost labor force will continue to be a crucial driving factor for the sustained development of the textile industry. Moreover, stable energy prices remain critical for textile enterprises.

2. Low cotton prices have supported the continuous increase in Pakistan's yarn exports

In September 2023, the import value of Pakistani textile and apparel dropped to $186 million, reaching a new low in recent years. The total import value of textile goods in Pakistan for the first three quarters of the year amounted to $2.304 billion, representing a decrease of over 30% compared to the cumulative imports of the previous year. On one hand, the scarcity of foreign exchange reserves continues to limit the import demand of businesses. On the other hand, the relatively stable weather conditions during the arrival of new cotton in Pakistan have gradually eased the domestic cotton gap. In September, the import of raw cotton in Pakistan was only 11,100 tons, a nearly 50% decrease compared to August. However, the domestic production capacity of synthetic yarn and man-made fibers still cannot fully meet the domestic production demand. Recently, the total monthly import volume of these two products has remained around 40,000 to 60,000 tons, with the proportion of imports accounting for more than 40%.

According to foreign media reports, the demand for local cotton yarn in Pakistan has been relatively weak recently, and the declining cotton price seems to serve as the best evidence. The price of Pakistani cotton is equivalent to below 11200yuan/mt, with a price spread of over 6,000yuan/mt compared to 3128B-grade Chinese cotton. The relatively low cost of cotton prices has led to a continuous decline in the ex-works price of medium and low-grade Pakistani yarn, while also helping the gradual recovery of Pakistani yarn exports. In September 2023, Pakistani yarn exports reached 41,600 tons, reaching a high level in nearly five years. Taking into account recent import data of cotton yarn in the Chinese market, it is speculated that over 80% of Pakistani yarn has entered the Chinese market, and the price advantage of Pakistani siro-spun yarn compared to China's domestic siro-spun yarn also provides strong support for future Pakistani yarn exports.

In summary, compared to the difficulties faced by Pakistani cotton production cut in the previous year, Pakistan is now more self-sufficient, which has improved the profit and production enthusiasm for yarn mills to some extent, leading to smoother exports of Pakistani yarn. However, for cotton farmers, the excessively low purchase prices may affect their intention to plant cotton in the next year. . The development of the textile industry chain in Pakistan is becoming more complete, but it is still limited by factors such as technology and equipment. The majority of exports primarily comprise semi-processed products. As the main importing country for Pakistani textile semi-finished products, the Chinese market is promoting various forms of cooperative partnerships, providing raw materials, and financial support, leveraging Pakistan's demographic dividend, and bringing more growth opportunities to its textile industry.