Textile exports during 2MFY20 increased 2.3 percent year on year against a growth of 3 percent in total exports during the period. The textile group accounted for 61 percent of total exports during the first two months of FY20 as opposed to 62 percent during the same period last year—not too major a difference. In fact, despite a loss in percentage shares, the balance of trade within the textile group actually improved by 10 percent.
Growth in textile exports was largely driven by downstream retail items, which are typically higher on the value chain namely knitwear, bed wear and ready-made garments. They together constitute more than 50 percent weightage within the textile group and a 38 percent share in total exports (SPLY: 36 percent).
Volumetrically, readymade garments increased 35 percent while price per unit dropped 20 percent during the first two months of FY20 as compared to the corresponding period. Similarly, bed wear recorded a 16 percent drop in price per unit during the period under review. Quantity sold increased by 20 percent during the same period.
An industry source pointed out that international buyers are well aware of currency adjustments and negotiates the contracts accordingly, resulting in the lower unit prices for exports. Rupee devalued more than 20 percent against the greenback during FY19. However, the ongoing fiscal year saw rupee appreciate 2 percent against the dollar in the first two months. The source further added that domestic players are now skewed towards local markets as they are fetching higher prices domestically relative to international prices.
As for knitwear, prices remained relatively stable, as the increase in unit prices amounted to a meager 2 percent during 2MFY20. In terms of quantity, the increase stood at 11 percent during the same period.
On the other end of the spectrum in textile value chain, cotton yarn saw a marginal increase of 2 percent in quantity for 2MFY20 while prices dropped 10 percent during the same period. A trade war between the economic giants China and United States has disrupted export prices for cotton yarn. As China accounts for more than 50 percent of Pakistan’s cotton yarn exports it has adversely impacted yarn exports. SBP highlighted this in its third quarterly report stating “According to Chinese customs data, cotton and yarn imports by China had dropped by a sizable 17.2 percent in CY18, as the country imposed additional retaliatory tariffs on its top yarn supplier, the United States (in July 2018). To make up for the resultant shortfall, China started unloading the sizable stockpile of cotton it had built up over the years to its ginning industry. At the same time, China diverted some of its import demand for higher count yarn to Brazil, Australia and India, which managed to increase their market shares, according to the USDA. However, due to a product mismatch, Pakistani exporters could not benefit from this shift in Chinese demand, as Pakistan’s ginning industry mostly produces low-count yarn, which is not widely used in apparel-making”
Textile exports for the first two months - despite gaining some impetus - do not suggest a turnaround yet. A government official states that due to higher labour costs in China, it is moving textile operations to Pakistan. If this follows through, the textile sector is likely to spur growth in exports.