Egypt's textile crisis keeps on spinning

Ahmed Feteha, Sunday 8 May 2011

Factory-owners continue to demand a halt in cotton exports to ease up the growing financial burden of acquiring raw materials

Spinning and Weaving
(Photo: AP)

A dispute between private sector spinning and weaving companies and cotton exporters is continuing to overshadow the textile industry despite efforts to contain it.


The Federation of Cotton Exporters (FCE) has reached an amicable agreement with local spinning and weaving producers to halt new export contracts until early June, according to the independent Egyptian newspaper El-Masry El-Youm. The agreement grants local companies the right to obtain cotton at the export rate minus setup fees.


However, the crisis is not yet resolved.


Mohsen El-Gilany, head of the Holding Company for Spinning and Weaving, the largest company in the sector, announced that a meeting will be held tomorrow with factory owners to mediate a solution.


Local spinning and weaving companies have vowed to shut down their factories if the government does not comply with their demands to cease cotton exports and lift duty charges on imports.


A strike in front of the cabinet was scheduled for Saturday but has been postponed until Monday awaiting the government’s reaction.


“The private sector cannot afford the new yarn prices; they are simply demanding that the government subsidise their operations,” a source in the General Committee for Cotton Trade (GCCT) tells Ahram Online.


The unprecedented growth in cotton prices has combined with a diminishing supply of yarn to stretch all of Egypt’s spinning and weaving companies.

The private sector seems to be suffering the most.


The FCE has strongly opposed the demands of the distressed companies, warning that cessation of exports before fulfilling all contracted commitments will lead to major problems for traders that could result in the loss of world export markets.


“Ceasing exports will be a true catastrophe for the industry. Egypt’s reputation in the cotton market will be severely tarnished.... if we lose a client we’ll never get him back,” says the GCCT source.


A shrinking export market would leave local farmers reluctant to cultivate cotton in favour of more profitable crops.


The FCE submitted a memorandum to the Prime Minister explaining the grave economic, legal and agricultural consequences of complying with the spinners and weavers demands.


The memorandum concluded that local company production needs are already secured through 300,000 quintals (3,000 Kg) which have not yet been contracted, in addition to a further 300,000 that were recently imported.


The FCE said there are contractual commitments this season to export 860,000 quintals (86,000 Kg) which are yet to be fulfilled.

Short link: