The sequential decrease can be attributed to across the board slowdown with disposable income dropping in export destinations, along with operational challenges in the form of heightened input costs and increased finance costs. To note, the SBP has also increased the rates under the EFS and LTFF programs to 13% in December 2022.
Cumulative textile exports were recorded at US$8.7 billion in 1HFY23, lower by 7.1%YoY. For the month of December 2022, the 6.7%MoM dip in value-added textiles was offset by an 8.3%MoM growth in the non-value added segment.
Within the non-value-added exports, the brunt of the growth was driven by cotton yarn, wherein exports increased by 24.4%MoM, with a substantial increase of 39%MoM in the quantities exported.
As for the value added segment, exports of Knitwear dipped by 11.6%MoM to US$353.7 million, with volumes dropping by 11.2%MoM to 15 million dozens in December 2022.
Moreover, data indicates that exporters may have had to offer lower prices in a bid to increase volumes. Wherein, average prices of Knitwear during the month were down by 0.5%MoM and 3.3% lower than the 6MFY23 average realized price.
The same is true in the non-value added segment, with cotton yarn exports averaging realized price ofUS$3,076 per ton during the month, lower by 10.6%MoM and down by 14.3% as compared to 6 month average during December 2022 Cotton prices receding in the local market
Cotton prices in the local market have dropped in the recent past, from recent highs of PKR24,649/40kg reached in August 2022 to PKR21,434/40kg currently—depicting a drop of 13%.
On the international front, recently, prices have rebounded from recent lows of USc89.2/lb reached in Nov’22, to currently trade at USc100.6/lb.
On an FYTD basis, prices have dropped by 27.8%. While the local prices are lower than international prices (equivalent to PKR20,221/40kg at prevalent interbank rate of PKR228/US$).
Moreover, the harvesting of local cotton is challenging amid devastating floods and declining cotton crop cultivation.
As evident by the 6MFY23 numbers thus far, down by 7.1%YoY, textile exports are expected to remain lackluster for the remainder of the year. Going forward, textile exports are expected to remain under pressure owing to weak macros of key export markets.
Analysts expect 10-15% dip in textile exports in FY23 predicated on the less-than optimal economic situation brewing elsewhere in the world, with inflationary pressures remaining elevated in the developed world.
For example, CPI inflation in the US clocked in at 6.5% last month, which while lower than earlier readings, remains significantly higher than the target of 2%-- which would lead to reduced disposable incomes, in turn leading to a dip in demand in the medium term. Furthermore, expected increases in gas prices would lead to a contraction in the margins of textile industry.
No comments:
Post a Comment