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Spinners cut down yarn production
May '11
Spinning mills in Pakistan are cutting down yarn production, mainly due to a plunge in prices of yarn, which have fallen by 33 percent in the last two months, along with which, there has been a slowdown in demand from domestic weavers and from its biggest overseas buyer; China.

Fibre2fashion spoke exclusively to a wide cross section of spinners in the Pakistan textile industry to understand the reasons for the drop in yarn prices.

Mr. Gohar Ejaz, Chairman - APTMA said, “Not only the yarn prices are going down, but raw cotton and grey fabric prices too are also falling, thus the production is also low. The prices that we are holding for July contract are around $1.50 today. So, definitely prices have fallen. The prices have fallen by $1.50/bale of cotton and yarn has fallen down even below $1. So yarn is also selling at the same or may be at a lower price than cotton.

“Basically there is no buying happening, so the mills have opted to close their production capacities by 15 days a month, but we're also facing a severe energy crisis in Pakistan. We have to curtail the gas consumption because the industries have to buy gas. So the industries have decided to reduce the production of yarn from 225,000 a month to 210,000 tons a month in the month of May and June.

“So APTMA has now decided that we will not fully operate the mills. We will be working for three days in a week. Initially we used to run the mills on alternate days, but that was working out to be costly. Pakistan has the third largest textile industry in the world after China and India. This is the way, the third largest industry in the world, has decided to face the crisis”, he wrapped up by saying.

“A lot of spinning mills in Pakistan have shut down due to falling cotton and yarn prices. The mills that cater to the local market, cannot afford to run the mills as, the cotton inventory lying with the mills is of a higher price, and now the yarn prices have gone down drastically. In addition to this, there is a huge energy crisis, which adds to the woes of the spinning mills”, said, Mr SM Imran, Director - Din Textile Mills Ltd.

He added by saying, “The bigger players, who are into exports, cannot completely shut down their mills because; they need to maintain their market share. There is a very serious situation. But we are hopeful that things will be better soon”.

Speaking about their strategy in facing the crisis, he informed, “Since the Din Group is into exports, we have to maintain our market share, so we have just reduced our production capacities to almost 50%. Meanwhile, we are concentrating on other products which are not directly and so much affected by cotton prices”.

The former Chairman of APTMA - Mr. Abid Farooq said, “A number of mills are closing down because, earlier cotton prices were very high and now, prices have gone down so badly that there's no economics in running the project.

“It's a temporary thing, of course, because the market has over-corrected itself, as it went up too high and has now gone down too low. So basically there is an over-reaction to it and the mills are temporarily looking at the situation and curtailing production, because there is very little demand for the yarn at prices at which they can break-even”.

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