Earlier this week, BR Research identified that denim fabric export fell by more than two-thirds in FY21, without a corresponding increase in denim apparel export. For more, read: “Denim: under weather?”, published on Tuesday, 27 October 2021). But denim fabric export isn’t the only one witnessing freefall; cotton cloth (of various types) fell by 58 percent in FY21, following a 17 percent decline a year earlier when trade was eclipsed by pandemic induced lockdowns worldwide.
On overall basis, woven fabric exports made predominantly of cotton (HS Code 5208 to 5212) have fallen by two-thirds since its peak level in FY19. Of these, the steepest fall has been witnessed under HS code 5209 – close to 80 percent, which in good years contributed more than 40 percent of cloth export volume. This is followed by HS codes under 5208, where volume fell by over 42 percent since FY19. Together, the two categories contribute over three-fourths of cloth export volume (long term average). Volume under other product categories also witnessed precipitous falls, declining by more than half on aggregate basis.
Although commentators have been quick to write off the sharp contraction in denim fabric export to waning demand for apparel in exporting destinations during pandemic. But clearly, decline in fabric export reflects a broad-based secular trend. It must be emphasized that fabric export fell across the spectrum, from predominantly cotton-based fabrics such as denim, to fabrics made of mixed variety, including MMF and other natural fibres.
While product-wise global trends are unclear, global trade for cotton cloth only witnessed a temporary bump during 2020 (Covid year), falling from $19.5 to $15 billion (quantity is unavailable). By most accounts, global fabric trade is in a recovery phase, although unit prices are on a rollercoaster ride thanks to global commodity spiral and US ban on Xinjiang cotton. Meanwhile, Pakistan’s cotton cloth export has continued its freefall in Q1-FY22, nosediving by another 75 percent over same period last year. If the trend holds, cloth exports will clock in at barely 0.5 million sq meters in full year FY22, 81 percent less than just three years ago, and possibly lowest in last two decades, if not three.
Although the great plunge of cotton cloth (woven fabric made predominantly of cotton) exports may partially be explained by decline in local cotton output during the past two years, the reduction in cloth export volume is much steeper than fall in cotton production. Moreover, news from the farm indicate that cotton output has posted a significant recovery in the ongoing season, but that does not seem to have instilled hope among cloth producers, who seem to have remained more interested in selling mostly to local buyers.
Although no reliable data of local cotton cloth production is unavailable, discussions with market players indicate that total cotton-based cloth production is in the vicinity of 4 – 4.5 million sq meters (10-year average). Of this, Large Scale Manufacturing composite textile units manufacture 1 million sq meters, which reflects itself in the monthly QIM report by PBS. Cotton cloth production by LSM units has shown no serious contraction versus its long-term performance, other than a sudden plunge in Q4-2020, when local industry came to a halt due to country wide lockdown. Similarly, cotton yarn output has also remained unchanged, indicating that local market is not facing an overall shortfall of basic raw material.
What then is going on in the cotton cloth sector? The textile export data seems to offer no answers.