Textiles – Stitching the Recent Trends

October 2013

Snapshot p Pakistan’s Textile Industry – Some facts World Cotton Analysis World Clothing and Textile Dynamics Importance of Pakistan’s Textile Performance Risks

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Pakistan’s Textile Industry – Some facts 1

4th largest producer of cotton 3rd largest spinning capacity in Asia with 5% of the global spinning capacity 2 Largest industrial sector – 46 percent of the total manufacturing, providing employment to 40% of industrial 3 labour force and contributing 8% to GDP More than 50% of the country’s exports

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Pakistan’s Textile Industry – Some facts Pakistan’s textile industry consists of large scale organized segment and highly fragmented cottage/small and medium units It has a number of identified associations – 20 separate p identified unions

Upstream Organized Segment Ginning Spinning Weaving

Downstream Unorganized Segment Dyeing and finishing Madeups Knitting Garments Towel Hosiery

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

World Cotton Analysis

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Global Cotton Producing Areas

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

4

Risks

5

Source: USDA

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

World Cotton Demand and Supply Continued excess supply of cotton China – the largest producer and consumer 65% consumption stays t with ith three countries Pakistan’s Textile Industry – Some facts

World Cotton Analysis

5

85%

81%

65%

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

World Cotton Demand and Supply

5

China leading importer The USA – largest exporter Pakistan – net importer

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Cotton Demand and Supply 5

China carrying recordd level l l ending stocks Huge world stocks

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

6

Continued acquisition of cotton by the Government of China at a higher price Movement in Pakistan’s cotton prices largely relates to international price variations Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Cotton Pricing Point to Note

Impact on Price

a. Cotton Production | Sufficient b. Ending Stock Level | Ample c Cotton Demand | Stable c.

Neutral

d. China’s Cotton Acquisition/Inventory Release Policy | Uncertain

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Negative

Performance

Risks

World Clothing and Textile Dynamics

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Textile and Clothing Supply

8

China the leader in world textile and clothing exports Increasing share of China and reducing share of the EU Pakistan not a prominent player in clothing Bangladesh and Viet Nam strengthening their presence in the world ld clothing l thi trade Stagnant pperformance of Pakistan in textile Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Textile and Clothing Demand

8

Th EU andd The the USA – major j demand drivers Slow Sl economic activity hurting the textile demand Reducing share of Chi China Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Importance of Textiles for Major Exporters

8

Substantial increase in merchandise exports of India, Viet Nam and Bangladesh Textile and clothing exports – a small portion (less than 10%) of the merchandise exports of most of the countries except for Bangladesh and Pakistan Pakistan – a weak player Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Need of Textiles for Major Importers

8

Rise in merchandise imports of China, while Indonesia and Viet Nam gradually enhancing the import pie Textile and clothing imports – a nominal portion of the major demand drivers’ need B l d h - increasing Bangladesh i i share h off textile t til in i the th imports i t Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Importance of Pakistan’s Textile

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Demand Drivers for Pakistan’s Textile Exports 9

The USA, the EU and China – generating demand for Pakistan V l tilit in Volatility i exports t to t Bangladesh B l d h Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Significance of Pakistan’s Textile Exports

Pakistan – gradually building markets in the UK, Spain, Germany, Italy and China Declining share in the UAE V l ili in Volatility i Bangladesh’s B l d h’ demand d d Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

8,9

Performance

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

7

a.. Area under cultivation | largely the same b Affect b. Aff off fl flood d| slightly more than last yyear c. Proportion of BT cotton | increasing

56%

19%

Cotton Production Estimate | Close to FY13 Flood affected areas Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

10

Significant rise due to higher cotton and product prices

Five segments contributing 80% of the exports I Increasing i yarn quantities titi Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

10

Huge rise due to higher quantities

Largely sustained performance Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Textile - Credit Behavior

11

Textile loans – reduced share but increased NPLs Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Pakistan Textiles – Risks for FY14 Fluctuation In Cotton Pricing: likely to remain largely at the current level but uncertainty regarding China China’ss stock releasing policy is critical. Demand Pattern: continue to improve because of largely sustained share in the USA and increasing share in China. Moreover, GSP Plus to Pakistan should bode well for its textile exports. Energy Crisis Due To Non Availability Of Gas: would continue to pose a threat.

Pakistan’s Textile Industry – Some facts

World Cotton Analysis

World Clothing and Textile Dynamics

Importance of Pakistan’s Textile

Performance

Risks

Bibliography 1. 2.

Pakistan Economic Survey 2012-2013 : Manufacturing and Mining | Section 3.2 Pakistan Textile Journal | February - 2010 | Pakistan: The third largest spinner country in Asia by Dr. Noor Ahmed Memon 3. Pakistan Economic Survey | 2012-2013, 2011-12 | Manufacturing and Mining | Section 3.2 4. http://sff.arts.ac.uk/Fibre%20Origins/Resources/worldmapscotton3d.png 5. United States Department of Agriculture: http://www.fas.usda.gov/cotton 6. Pakistan Central Cotton Committee http://www.pccc.gov.pk/index.php?page=daily-cotton-marketreport 7. Pakistan Cotton Ginning Association http://www.pcga.org/facts___figures.html 8. World Trade Organization : International Trade Statistics – 2012, 2011, 2010, 2009, 2008 http://www.wto.org/english/res_e/statis_e/statis_bis_e.htm?solution=WTO&path=/Dashboards/MAP S&fil M S&file=Map.wcdf&bookmarkState={%22impl%22:%22client%22,%22params%22:{%22langParam df&b k kS {%22i l%22 %22 li %22 %22 %22 {%22l P %22:%22en%22}} 9. State Bank of Pakistan : Publications | Exports of Goods and Services (Annual) http://www.sbp.org.pk/departments/stats/Annual_Export_Receipt/indexArc.htm 10. Pakistan Bureau of Statistics http://www.pbs.gov.pk/trade-detail 10 http://www pbs gov pk/trade detail 11. State Bank of Pakistan: Statistics of the Banking System | Quarterly editions

Analysts

Rana M. Nadeem nadeem@pacra com [email protected]

Aisha Khalid aisha@pacra com [email protected]

Saira Rizwan saira rizwan@pacra com [email protected]

M. Shahnawaz A. Khanzada shahnawaz aziz@pacra com [email protected]

Contact Number: +92 42 3586 9504

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