Economy, Business And Markets

Textile Manufacturers Complain of Market Glut

Textile Manufacturers Complain of Market GlutTextile Manufacturers Complain of Market Glut

The textile and clothing sector, which registered more than 5% growth in export value last Iranian year (ended March 20) compared to the preceding year to $989 million, might not see similar growth this year as it is struggling with a market glut resulting from downswing in domestic and export markets and unregulated imports from Turkey.

Head of Isfahan’s Textile Association Morteza Mansouri told Forsat-e Emrouz newspaper that textile manufacturing units are faced with overflowing storehouses. Among other reasons, he referred to reduced demands in neighboring countries as a result of political instability and conflicts there.

“The rise of IS militant group in Iraq, a major buyer of Iran’s textile products, has led to lower demand for Iran’s textile and clothing export,” Mansouri said.

Some domestic manufacturers have even been offering their products at rates below production cost in view of the recent hike in prices for cotton and petrochemical products, said the expert.

Rubbing salt to the textile manufacturers’ wound are cheap imports from Turkey flooding the Iranian markets. As part of a preferential trade agreement with Turkey which became effective in January, Iran agreed to reduce import tariffs on certain commodities, including textile and clothing, to combat smuggling.

While the move did not prove effective in curbing smuggling, due to relatively high import tariffs, it resulted in Turkey’s exports to Iran shooting up more than 30% in Q1 period of 2015.

A board member at Iran’s Association of Textile Industries, Shervin Badamchi says a number of yarn and textile manufacturing units have shut production during the month of Ramadan (the Muslim holy month of fasting occurring this year on June 18-July 17) due to shortage of liquidity.

“It is unclear whether these units will reopen after a month, as shortage of liquidity could push many factories to bankruptcy,” said the expert.

He said the yarn producing factories have an equivalent of about six-month needs of the textile industry stored in their warehouses.

“The figure is even higher in the fabrics sector, with about 8-10 months of the market demands piled up in the stores,” said Badamchi.

  Textile Exports and Investments

The overall export trend during the past 12 years has been positive, recording a peak value of $1.105 billion during the Iranian year ending March 20, 2013, based on data provided by managing director of Textile and Clothing Department at the Ministry of Industries, Mining and Trade, Golnaz Nassrollahi, in Tejarat-e Farda weekly magazine.

Segments such as carpet flooring and leather experienced growths in exports last Iranian year over the preceding year. However, sectors such as cotton yarn, fibers and fabrics saw exports slowing down. A maximum export of $339 million was recorded in the carpet flooring sector.

Meanwhile, investments in the sector could be analyzed by reviewing the expenditures on import of textile machinery.  On average, about $250-300 million per year have been spent on textile machinery imports over the past 12 years.

The trend for machinery imports has been oscillating over the period, having continuously declined in the past three years after a peak of $424 million in 2010-2011.

Iran exports various textile products, including yarns, synthetic fibers, machine-made carpet, raw leather and shoes, to neighboring countries such as Afghanistan and Iraq, as well to a handful of European countries.

According to Nassrollahi, Iran’s textile sector has the capacity to annually produce 500,000 tons of various types of fibers, 700,000 tons of yarns and 120,000 tons of machine-made carpets. Iran produces about 1 billion square meters of various types of fabrics annually.