Textile industry has been consuming more than 70% of polyester staple fibre (PSF) in the textile value chain, which bodes well for the sector’s rising exports. The decline in cotton production created a potential growth opportunity for polyester which has recyclable properties.
On year-on-year (YoY) basis, polyester industry has recorded a growth of 40% reaching Rs109 billion during FY2021 from Rs78 billion during the corresponding period of FY20. Production of polyester fibre increased by 37% in volumetric terms during FY21.
Pakistan polyester demand took a steep dip in FY20 and registered a free fall of 26% on YoY basis, as the pandemic halted business activities from textile sector. After that the demand has recovered and reached 502k tons in FY21 compared to 362k tons in FY20, which was the lowest during the last five years.
During FY21, import of polyester was 4% and remained stable over the last year, as the major demand was met through local production. Polyester is the main synthetic fibre and has a broad potential to grow due to the decline in cotton production. Recyclability and durability are the major factors of polyester which create a potential growth opportunity.
The ICI Pakistan Limited was the pioneer and Ibrahim fibres, ICI Pakistan and Rupali polyester are the major manufacturers of polyester in Pakistan. Polyester sector has the potential to produce 535k tons of polyester by installing full capacity levels, but the production remained below 90% of the capacity during the last five years. Actual production surged by 37% in FY21 after a decline of 23% in FY20 due to a slowdown in economic activities.
The PSF is a viable substitute for cotton which provides an advantage to textile industry allowing maximum utilisation of resources.
In Pakistan, the market is relatively new and small. However, because of the recyclability of PET (polyethylene terephthalate) waste and used bottles, which reduces the risk of cost volatility associated with first-hand PSF formation, it has enormous growth potential. In FY20, Pakistan’s total capacity for recycled PSF (RPSF) production was around 86k tons per year.
It is predicted that the RPSF will be the future of the entire textile industry. Both woven and non-woven industries use the RPSF. The annual turnover of the RPSF segment in Pakistan is Rs3,563 million. The RPSF is a recycled product that is sold at a nearly 25% discount on the price of PSF.
Polyesters are extensively used in home furnishing and apparel, pillow, blankets, shirt, pants, bedsheets, upholstered furniture, and computer mouse mats. Moreover, industrial polyester fibres are used for multi-purposes in various sectors such as safety belts, conveyor belts, car type reinforcements, bottles, wire insulation, and insulating tapes.
According to State bank of Pakistan (SBP) data, the industry’s total borrowing was recorded at Rs26.6 billion at the end of November 21.
Raw material cost is the key component of the sector’s cost structure, therefore, is essential in determining the output price and margins of the sector. Major raw materials of PSF are purified terephthalic acid (PTA), and monoethylene glycol (MEG).
The PTA is majorly procured locally and oil is a major resource for its production, therefore, the PSF price is also subject to variations in oil prices. The MEG is entirely imported. The highest share of imports comes from China.
The government should provide loans facility to local producers at a low margin to increase efficiency and improve quality through technology upgrades.
