More trouble brews for our struggling textile industry; as of October 01, the PCGA reported a 26 percent decline in cotton arrivals year-on-year. The crop has suffered losses due to heavy rain and floods in Sindh and Punjab. It was also reported earlier that the overall production outlook is lowered to 13.3 million bales from the earlier optimistic anticipation of 15.5 million bales.
With the looming lower production, local cotton prices have been on an uptrend as of late. So, growers will benefit on the one hand, but the cost of production of our mills will likely rise. Moreover, the lowered production may possibly lead to cotton imports by the value-added sector to fulfill their demand, thus hurting their margins further.
Then adding to this issue is the problem of Indian yarn imports. Earlier this week, BR Research wrote on the epidemic of an influx of Indian yarn imports that is hurting the local spinning industry. The downstream, value-added industry is opting for the cheaper Indian yarn, which is available at a discount of 4 percent to local yarn, as per BMA Capital. This difference might even widen further in light of the lower cotton crop this year.
With that said, the demand for Indian yarn imports might increase. APTMA General Secretary spoke to BR Research, saying that the cotton yield is bad this year, so either cotton will have to be imported or yarn will see an influx. He added that gas will be unavailable from November to February and the industry cannot compete.
APTMA has been making some noise with regard to this prevailing situation and has demanded the import duty on Indian yarn be raised from 5 percent to at least 25 percent. With this, the spinning sector can remain competitive, at least within own country!
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