Increasing yarn prices harm textile exports

The sudden spike in the prices of course cotton yarns on the domestic market in recent days is likely to jeopardize the value-added textile export contracts and force many exporters to default on their commitments, said Ijaz Khokhar, a former chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association.

He said runaway prices of course yarns - which are used in 90% value-added textile exports from Pakistan like trousers and bed sheets - have eroded viability of the orders booked for delivery in March to June. He claimed that the rates of coarse (10/1) yarn had gone up to Rs. 630 per lb from Rs. 460 couple of months ago.

The rise in the global cotton prices is more speculative than anything else, caused by a general upward trend in the commodity markets, weakening dollar and the liquidity created by downward revision of US interest rates.

Mr Khokhar says the overall production cost of value-added textile exporters has swelled by 20% or more because of the increased rates of coarse yarns as well as recent hike in energy prices. The cost of fabric dyeing has also increased from Rs.8 to Rs.10 per metre and of bleaching by Rs.2 to Rs.3 per metre. Therefore, with additional the increase in the yarn prices to the cost, the viability of the industry is further eroded. He demanded that the Government should immediately impose a ban on the export of the course yarn to ensure its availability to the local value-added industry and help bring down its prices in the domestic market.