KARACHI: Textile exporters in Pakistan, like their regional counterparts, struggle to be merry this Christmas season, as a buying freeze abroad has hit all segments, from apparel, denim and knits to home textiles, though they hope things will get better in the coming months.
“This time around, we did not get Christmas orders,” says Sohail Pasha, chairman of the Pakistan Textile Exporters Association.
As a rule of thumb, international markets move six months in advance. Hence, Christmas orders are placed in June-July and delivered three months before the start of the season. But demand was slow due to the global economic environment this year.
“The recession has spread everywhere, from Europe and UK to Australia and South Africa,” says Mr Pasha, adding that warehouses are already full of inventories.
Mills have to work at half capacity as retailers abroad struggle to clear out shelves
Retailers abroad are having sales to clear out their merchandise. Meanwhile, manufacturers in Pakistan are holding stocks ready to ship overseas. In Faisalabad, the export-oriented mills are working at about 40-50 per cent capacity, and at roughly 60pc in Karachi, he says.
Because of excess stocks, the benefits of the rupee devaluation are not kicking in either. “Since they do not want to purchase from us, our lower prices make no difference, and we got no orders for the Christmas season,” explains Mr Pasha.
“There are enough stocks on their shelves, their stockrooms and our warehouses to last till March 2023. After that, we are hoping for some positive movement,” he adds.
Many places, no money
The American economy operates on credit and mortgages. As the Federal Reserve — the US central bank — hikes up its rates, the cost of credit pinches the wallets of the average Joe in America, making him less likely to spend.
During the pandemic, the economy had come to a standstill. The usual avenues of spending, such as leisure, travel and clubbing, were forbidden, so people spent money on making their houses beautiful, which also fed the super cycle success of Pakistan’s textile exports.
Now, the reverse has happened. They have places to go but less spending money, so Pakistan’s exports are taking the hit, says Mr Pasha.
Meanwhile, shipment time from China, the world’s factory, has increased since the pandemic until recently.
Retailers factored in 120 days before the ordered products could reach distribution centres for many reasons, such as insufficient trucks and truckers and port and transit delays, says Khurrum Mukhtar, patron-in-chief of the Pakistan Textile Exporters Association.
However, the issues were resolved faster than anticipated, and Chinese goods reached distribution centres in 45 days. Thus retailers have a backlog of inventory during a global recession.
But, adds Mr Mukhtar optimistically, Pakistan’s finished textile products are in the low and medium category — they do not last beyond four or five washes. So, the target market of Pakistan’s consumer textiles will soon have to purchase new products.
Regional slump
Pakistan is not alone in suffering from a loss in demand in the second half of 2022.
According to figures released by Vietnamese Customs, textiles and clothing exports dropped 32pc year-on-year in September and garment manufacturers were working at 50-70pc capacity.
India is affected, too. The United States is a major textile market for India, accounting for half of home textile exports and 28pc of apparel exports. Last month, its textile exports plummeted 41.5pc year-on-year.
In Sri Lanka, textile exporters are facing a 30pc drop in orders in the coming months.
The decline in Pakistan is hitting the textile industry harder after enjoying the pandemic super cycle. But that balloon has burst.
“Two years were exceptionally good thanks to the pandemic,” says Saleem Parekh, executive director of Al-Abbas Fabrics. “We were the first country to open up compared to our competitors such as Vietnam, Sri Lanka and India. As a result, we were bombarded with orders.”
This time around though, local textile manufacturers are feeling the pinch stronger than previous dips in demand because they enhanced capacities during the pandemic when the orders were pouring in.
Before Covid-19, many buyers were reluctant to come to Pakistan because of the country’s brand image. But they were forced to opt for the country during the pandemic after their usual suppliers were closed.
“Pakistani exporters rose to the occasion, performing well in terms of timely shipments and quality. After the slump in demand is over, we can again compete successfully if we are given a constant supply of gas and our liquidity problems are sorted out,” says Mr Parekh.
Like his brethren, Mr Parekh is anticipating that when the Christmas season is over and the inventories have run out, textile orders will renew.
Published in Dawn, November 30th, 2022
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