Textile gloom

LAHORE: A conversation with textile industry players revealed that the order flow has slowed to a trickle. Exporters stated that the most worrying aspect for them was the fact that foreign buyers had put off the dispatch of their orders.

They now delay payments up until 90 days in lieu of their normal payment time of 45 days.

Exporters have been hit hard by this situation. Their stocks are too high and they don’t get paid for their shipments until three months after receiving them.

According to one exporter in the apparel sector, his monthly average exports were Rs600 million. He stated that he had not been paid for three consignments. He claimed that his unit is no longer possible to run with Rs1.8billion in debt to foreign buyers and around Rs400m worth of manufactured apparel consignments being held up.

It was discovered that all apparel sectors are facing the same problem. Because they exhausted all their resources and exceeded their bank limits, small apparel exporters were forced to close their doors temporarily.

The banks are not increasing their limits until they have a solid mortgage.

These are the large and medium-sized exporters that have invested their profits in real property or other ventures. They are cutting down on essential costs such as the layoff of their highly skilled workforce.

However, there are few wise entrepreneurs who could have foreseen the problems that were coming.

They maintained their high earnings last year and the profits are so great that they have able to bear the effect of recession, stalled orders, and late payments.

The spinning sector is the most troubled of all the textile industries.

They also made more money due to lower cotton prices and subventioned power and energy. This was in addition to higher demand on local and global markets.

Many spinners have entered real estate in large numbers. They were able to increase their real estate portfolio with the additional income.

The majority of this year saw cotton prices soar. The power and energy rates increased. Even worse, yarn demand dropped to a trickle.

In October, yarn exports from Pakistan dropped by 60 percent when compared to exports in October 2021. This is a worldwide phenomenon as Indian cotton yarn exports dropped by more than 40 percent in October 2022.

Today’s problem for spinners is that they have spun yarn out of expensive cotton while the market won’t pay enough to cover their costs. They have huge stocks of unsold stock.

The cotton rates have dropped by 50% in the past few weeks, adding insult to injury. Cotton that was bought at higher prices overseas will once again be unsellable by those who booked it. They don’t have enough reserves. They invested their textile income elsewhere. According to industry players, spinners operate at 50% capacity. Few units have been temporarily shut down.

Garment exporters are now realizing that the gloomy outlook will not last. They expect that January will see exports drop by 30 percent. They expect new orders. Otherwise, they would have to fire a lot of their skilled workers.