WWD.com/business-news/government-trade/pakistan-court-sides-with-yarn-mills-3018063/

LAHORE, Pakistan — A Pakistan court issued an order Tuesday that puts off the government’s yarn export quota restriction, which is aimed at boosting domestic knit production.

This story first appeared in the March 31, 2010 issue of WWD.  Subscribe Today.

Yarn mills went on a one-day strike March 18 to protest the export limit of 35,000 tons a month and the issue remained unresolved, despite negotiations with the textile ministry.

In the latest development in what might be a protracted dispute, Gohar Ejaz, chairman of All Pakistan Textile Mills Association, Punjab zone, said a court has stayed the yarn quota restriction for 25 mills from Lahore, six from Peshawar and 20 from Karachi that began March 1. These mills, set up specifically for export, were allowed to sell more than 80 percent of their yarn production abroad without restriction.

With the ruling, 25,000 tons of yarn export a month will be allowed by the courts in addition to the 35,000 tons a month under the quota restriction. Eighty percent of the country’s yarn production of 240,000 tons a month is sold domestically. A total of 47,000 tons was exported last month, he said.

“Pakistani yarn price on a cash basis is 10 percent lower than the international price,” said Ejaz who is also the chief executive officer of Ejaz Spinning Mills. “That is why China and Bangladesh want our yarn.”

But knitting mills argue yarn spinners created an artificial shortage in March by hoarding their stock in the hope of exporting it and maximizing profit, said Amir Hameed Khan, director operations at Masood Textiles.

Based in Faisalabad, Masood Textiles is the largest knitting mill in the country, with $160 million in sales last year and $175 million expected sale in 2010.

“There is an illogically higher increase in the price of yarn and fabric in Pakistan corresponding to the lower increase in the price of cotton,” said Imran Lateef, president of textile buying house Texlynx in Lahore, which works with garment and home textile mills. “If, for example, the price of cotton has gone up by 20 percent, then the price of yarn has gone up by 30 percent and fabric by 40 percent, here. This is bad timing for us because U.S. importers have been recently showing renewed interest in Pakistan mills, not wanting to rely solely on Chinese mills.”