Apparel / Textiles & Accessories

According to the customs data, Pakistan's textile exports will decline significantly, or at least according to the latest monthly trade report of the Pakistan Bureau of Statistics. According to customs data, the export volume of most medium and low-grade textiles in Pakistan showed a double-digit decline from July to October this year. If the number of clothing exports had not remained stable, the country's textile exports would have a negative growth.

At present, the decline of Pakistan's textile exports is spreading. It may not be long before the clothing exports are "disarmed and surrendered". At least, the cotton imports from July to October this year look like this. According to customs data, Pakistan's cotton imports in July October this year just exceeded 1 million bales, the lowest level since September December 2019. However, at that time, Pakistan imposed super high tariffs on cotton imports. Therefore, excluding this stage, the cotton import from July to October this year is the lowest level in more than ten years.

At the same time of the decline in cotton imports, the flood in Pakistan led to a sharp drop in cotton output of nearly half, and the current output forecast has dropped to the level of 4.5-5.5 million bales. If the current average monthly import of 250,000 bales continues, the annual cotton import will not exceed 3 million bales, the lowest since fiscal year 2016, when Pakistan's domestic cotton output was 10 million bales. According to the customs data, Pakistan's cotton consumption in most of the past decade was 1250-13.5 million bales, and cotton imports in recent years accounted for 40% of the total demand. However, the cotton consumption of factories in this fiscal year is likely to decline significantly, because the domestic cotton production has decreased significantly and the import volume has decreased significantly.

In addition to supply problems, cotton prices and downstream demand are also important reasons for the decrease in cotton imports. According to the customs data, first of all, as the international cotton price plummeted by nearly 50% from May to November, Pakistan's textile industry began to re sign contracts in order to obtain lower prices. Since August 2022, Pakistan's monthly average import price of cotton has exceeded the monthly average price of the international market in the same period, which has changed the situation that the average import price before was continuously lower than the international cotton price.

Now it seems that the Pakistani industry is overwhelmed by the raw material inventory at the peak price because of its bet on a sharp rise in international cotton prices. At this time, the economic recession has begun to spread in major export destinations. Therefore, although the domestic cotton supply decreased significantly, the gauze production did not rely more on imports, but continued to decline.

As for 2023, once the domestic cotton market ends and winter passes, Pakistan's cotton import is likely to recover, which also more clearly reflects the specific degree of economic recession in export destinations. However, even if the average monthly cotton import volume doubled, the annual import volume could hardly reach the peak of 5 million bales in the past two years.

From the current point of view, Pakistan's textile exports in the 2023 fiscal year will inevitably decline substantially. Whether the decline in demand will immediately turn into a decline in the export price of low-end products remains to be seen. The last time the international cotton price remained lower than 80 cents, Pakistan's textile exports fell into a standstill (fiscal year 2015-2020). It will take time to prove what will happen this time.