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Textile sector sandwiched by soaring yarn prices & Chinese goods
Jun '11
Sky-rocketing prices of yarn in the domestic market have hit the labour-intensive Egyptian textile industry over the last few months. Around one million workers depend on the Egyptian textile industry for their livelihood.

Around 51 percent of the textile firms in Al-Mahalla el-Kobra's Delta City have been compelled to cease their operations as the prices of yarn have shot from LE10 or around US$ 1.7 per kilo to LE31. Meanwhile, remaining firms in the industry are increasingly cutting down their work force.

Egypt has just witnessed a revolution and at such a time, 650,000 workers are at a risk of losing their job in Egypt's textile capital of Al-Mahalla, aver experts.

According to analysts, the Egyptian Government has no plan to privatise the ailing state-run firms, but would instead provide more funds to these firms. It is because, there has been a significant reduction in the losses accrued by these firms, which have come down from last fiscal's LE 2.3 billion to LE530 million for the current 2010-11 fiscal which ends on June 30, 2011.

Egypt's cotton exports for the current 2010-11 fiscal jumped to 2.2 million quintars (1 quintar = 45 kg). It mainly exports cotton to India, China and Switzerland.

The domestic producers each year need around four million quintars of cotton to keep their units functional.

The country's total production of ginned cotton and yarn is able to meet only around one-third of the overall demand of the domestic textile sector. And the current situation has put the domestic textile and yarn industries in a fix and has hit the country's leading labour-intensive industry.

The current hike in cotton prices is the biggest and it is being felt that the impending losses for both the manufacturers as well as the exporters due to soaring yarn prices will compel a number of firms to cease their operations.

The production units all across Egypt are facing severe crunch of raw materials as there is no cotton and yarn in the market. This has even caused private production units in Al-Mahalla and Shubra el-Kheima to cease operations.

In a way, the domestic textile manufacturers in the country are feeling as if they are trapped between the soaring yarn prices on the one hand, and large-scale invasion of China made goods on the other. Thus, it is evident that the country's age-old textile industry is passing through a very crucial stage.

While textile workers have asked Prime Minister Essam Sharaf to quickly take necessary steps to save the industry, experts estimate that yarn prices would fall as the global cotton output for 2011 is likely to exceed consumption.

Editorial note-
Since cotton is a natural commodity, its production depends on various parameters including climate, which tend to fluctuate over a period. Hence, the textile industry needs to take steps to insure itself against such uncertainties.

Fibre2fashion News Desk - India

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