IMPRESSIONS from a Cross-section

Global fabrics sector:

The international textile industry was adversely affected by the 2009 global financial crisis, and weaving was no exception. 2010 saw a major recovery for the spinning sector in Pakistan, and this prompted international buyers to secure fabric orders as well. As a result Samin also saw very positive developments in fabric sales during the period, with an increase of about 40 %.

Towards the end of November, final users of fabric had incorporated the increase in prices, so we were expecting very positive final two quarters in 2011. The situation was positive till January, but then it started taking a downturn. Cotton started to crash all over the world, and yarn followed closely. Cotton prices fell from 13500/mound to 6000/mound in a period of 5 months. Fabric buyers had sufficient stocks to be cautious in their buying and sales started to plummet.

Finishers are still looking to reduce their purchasing cost and buying has been minimal during the third and fourth quarters. We expect normal purchasing to resume after the summer holidays in September.

Industrial fabrics for abrasives and coating:

This has historically been a high value market and has always supported the weaving industry in tough times. Major clients for these markets were located in Europe and the USA. During the global financial crises the major industries affected were the housing and automobile sectors and as a result demand for these fabrics was completely wiped out. Recovery in this sector has been very slow and cautious, and whereas before the crisis, 15 % of Samin’s production was geared towards this market, currently it accounts for less than 2 %. However this market has started to recover and we expect a healthy growth during the coming financial year. 

Difficulties faced by fabric manufacturers:

Oddly enough the greatest difficulty faced by fabric manufacturers in Pakistan is not related to the textile business but industry in general. The number one problem is the national energy crisis. Today, Pakistan faces an energy shortfall of 8000 MW. Most mills, including Samin have invested in multiple captive energy sources over the years. Starting with diesel, we moved to furnace oil and then to gas. Currently, there is a shortfall in gas supplies of 220mmcfd in Punjab and we have had to install a connection with the national grid. Electricity supply from the grid is also unreliable with average load shedding of up to 17%. Not only is this having a catastrophic effect on our costs, but timely deliveries and quality of product are also at risk.

The next most pressing issue for fabric manufacturers is heavy contamination in the local supply of cotton. Pakistan produces 15 million bales of cotton annually but about 30 % is contaminated. There is currently a project underway in conjunction with USAID to improve levels of contamination by directly involving farmers, ginners and spinners. Hopefully by 2013 we will have a good percentage of local contamination free cotton, which will give the local industry a much-needed edge.

While this process is underway, Pakistan still has to import contamination free cotton and this is where another major problem comes in. During the past five years, Pakistan’s currency has seen a devaluation of approx. 43%. In 2006 dollar rate was Rs 60 and today it is Rs 85 approx, making the import of cotton increasingly expensive.

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