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Coronavirus
VERY HIGH Source: covid.gov.pk
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KPK
142,139

For Pakistan’s textile sector in general, and the spinning business in particular, CY13 has been a year full of blessings. But, as we bid a fond farewell a particularly fruitful year, things do not look as good for the spinners.
Up till now Pakistani spinners have done well given that they have an edge over India in producing coarse count yarn owing to abundant production of short staple fiber locally, which has in a higher demand in China. But the future of yarn has turned murky going forward, especially in light of China’s unpredictable cotton procurement policy.
The policy, which saw Beijing raising the floor price for local cotton, prompted Chinese mills to buy hefty amounts of cotton and yarn from abroad. But, it was the spinners who had the best end of the bargain, since Chinese policies dictated that cotton yarn could enter the country tariff-free; whereas millers had to pay hefty taxes on raw cotton imports.
As a consequence, Chinese imports of cotton yarn managed to nearly double between 2008-2011, with mills having imported a record 1.53 million metric tons of the white stuff between this period: as per data from INTL FCStone.
Pakistan in the meantime was the major beneficiary of this development, with raw cotton imports originating from the country having tripled since China began stockpiling it and local spinners consistently seeing their production capacities booked solid for months on end.
This year through August, Chinese mills had already imported 1.37 million tons of yarn and for all intents and purposes the demand looked set to grow. This provided an impetus to local spinning mills to make hefty investments into putting in additional spinning capacity to meet the influx of yarn orders from Beijing.
However, the expected demand for yarn has all but vanished in smoke. Because having spent the past two years building up massive cotton stockpiles—that now account for an estimated half of the world’s supply—the Chinese government is in the process selling off some of these reserves.
The influx of stocked Chinese cotton in the global arena has dampened the prospects for Pakistani spinners in particular and PBS’s recently-released export numbers for November back this statement, showing a quantitative decline of 22.8 percent month on month in yarn dispatches—which were the worst hit amongst all major textile categories.
Going forward, while the rest of the textile players higher up the value-chain will be enjoying the fruit of the GSP+, Pakistani spinners will remain highly vulnerable to Chinese policies and players like NCL—who have recently installed another 22,000 spinning spindles might see some depressing times ahead.