PAKISTAN: Cotton shortage ups yarn prices

Official sources said that the government continues to make efforts for reconciliation between spinners and value-added textile sector, which are at loggerheads over the capping of monthly yarn export quota at 35,000 tonnes from 50,000 tonnes. Spinners demand that the quota should be lifted, while value-added sector wants it to stay to ensure availability of yarn at lower rates.

In the meantime, stockpiles of domestic yarn have dwindled, as they do every year by the end of March. This time, the demand outstrips the supply by 3.3 million bales. The gap is being filled by the imported cotton.

Ejaz Gohar, chairman of All Pakistan Textile Mills Association Punjab, said millers opened some letter of credits for cotton import in December 2009, but the bulk of orders, which had to be placed in January-March 2010 quarter, were withheld due to the uncertain market conditions. He predicted tough times for the value-added sector from mid-April to June when 70 per cent of the mills would be without cotton.

Pakistan Readymade Garments Manufacturers and Exporters Associationís former chairman, Pervaiz Hanif, blamed the wrong government planning for the crisis.

He regretted that although the government knew that the cotton production in the country was short, it allowed export of almost 800,000 bales of cotton. The Trading Corporation of Pakistan should have intervened in the market to boost cotton rates and prevent its exports, he said.

Leading cloth exporter Adil Butt said the value-added units, that purchased yarn first and then export orders, have survived the crisis. However, majority of small and medium units do not have the capability to stock yarn in advance and when the yarn rates increased, they faced problems, he said.

Pakistan Hosiery Manufacturers Association former chairman M.I. Khurram said the value-added sector has come under pressure due to self-inflicted wounds. They tried to keep yarn rates low against the principles of free-market economy, he said.