Cotton shortage forces owners to shut down textile factories after floods

By
Business Desk
|
A representational image of a factory. — AFP/File
A representational image of a factory. — AFP/File 

  • Shortage of good quality cotton reason behind shutting down of factories. 
  • Larger firms less affected as they are well stocked.
  • Mill closures underscore challenges for sector employing about 10m people.


ISLAMABAD: Following the devastation caused by the floods that wiped out the cotton crop, Pakistan's small factories making bedsheets and towels for export to the US and Europe have started to shut down, The News reported citing Bloomberg

Pakistan Textile Exporters Association's patron-in-chief Khurram Mukhtar said that a shortage of good quality cotton, high fuel costs, and poor recovery of payments from buyers are the reasons behind the closing of small textile mills.

Mukhtar said that larger firms supplying global companies like Nike, Adidas AG, Puma SE, and Target Corp are well stocked and hence, they are less affected.

The mill closures underscore challenges for the sector that employs about 10 million people, accounts for 8% of the economy and adds more than half to the nation’s export earnings. Their hardships have become acute due to recent floods, which submerged a third of Pakistan, killed more than 1,600 people, and damaged about 35% of the cotton crop.

The latest blow comes at a difficult time for the South Asian nation that is already struggling with high inflation and falling currency reserves. The closure of firms, such as AN Textile Mills Ltd, Shams Textile Mills Ltd, JA Textile Mills Ltd and Asim Textile Mills Ltd, could worsen the country’s employment situation and hit its export earnings. Larger companies are also facing rough weather, with demand for their products seen falling about 10% by December from now due to a slowdown in Europe and the US, Mukhtar said.

Due to an “unforeseen downturn in the market and unavailability of good quality cotton” following heavy rains and floods, the company’s mills have been temporarily closed, Faisalabad-based AN Textile said in an exchange filing earlier this month.

Cotton production in Pakistan could slump to 6.5 million bales (of 170 kilogrammes each) in the year that started in July, compared with a target of 11 million, Mukhtar said. That could force Pakistan to spend about $3 billion to import cotton from countries such as Brazil, Turkey, the US, East and West Africa and Afghanistan, said Gohar Ejaz, patron-in-chief of All Pakistan Textile Mills Association. About 30% of Pakistan’s textile production capacity for exports has been hampered because of cotton and energy shortages, Ejaz said.

Pakistan’s textile sector, which exports about 60 per cent of its production, is also facing poor demand in the domestic market due to fragile economic conditions. Gross domestic product is estimated to halve from 5% in the fiscal year ending June following the floods that led to damages of around $30 billion. Pakistan secured a $1.1 billion loan from the International Monetary Fund in August to avert an imminent default.