March 07, 2008	Friday	Safar 28, 1429

LAHORE, March 6: The sudden spike in the prices of course cotton yarns on the domestic market in recent days is likely to jeopardise the value-added textile export contracts and force many exporters to default on their commitments.

“The runaway prices of course yarns – which are used in 90 per cent value-added textile exports from Pakistan like trousers and bed sheets – have eroded viability of the orders booked for delivery in March to June,” says Ijaz Khokhar, a former chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association.

He claimed that the rates of course (10/1) yarn had gone up to Rs630 per lb from Rs460 a couple of months ago.

“If the exporters failed to fulfil their export commitments, the country might substantially lose its already meagre share in the global textile exports,” he warned.

The domestic course yarn prices have increased by six to eight per cent in the recent days on the back of the increasing global cotton markets.

The cotton futures have already increased by $0.30 per lb over the last one month on the rising demand and supply fears.

Prices in the local cotton market also hiked to Rs3,650 per maund on Thursday as the reports of Indian cotton traders cancelling deliveries to Pakistan worried the textile industry.

“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.

If you compare the futures with physical increase in the cotton prices you would clearly notice the difference – Indian cotton has gone up by a mere $0.08 to $0.10 per lb. In Brazil and elsewhere the fibre’s prices have risen by $0.20 per lb,” says Tariq Mahmood, a former provincial chairman of the All Pakistan Textile Mills Association (Aptma).

Mr Khokhar says the overall production cost of value-added textile exporters has swelled by 20 per cent or more because of the increased rates of course yarns as well as recent hike in energy prices.

“The rates for dying fabrics have been raised from Rs8 to 10 per metre and of bleaching by Rs2 to 3 per metre. Add the increase in the yarn prices to our cost and you have an industry whose viability is completely eroded,” he says.

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.

“Unless the government does take some immediate action to reduce the cost of value added textile exporters, the country is sure to miss the textile export target for the year,” the Prgmea leader says.

An Aptma leader, however, insisted that the increase in the prices of cotton and yarn is a global phenomenon. It is not Pakistan-specific only.

“Therefore, it is ridiculous to demand imposition of ban on yarn exports. It would be far better if the government took some other measures to help the value-added textile exporters stave off the effects of rising yarn rates,” he added.