EghtesadOnline: Iran’s spinning factories are operating at full capacity, as the capacity of cotton mills increased by 47,000-48,000 tons last fiscal year (March 2019-20), the director general of the Ministry of Industries, Mining and Trade’s Textile and Clothing Department said.
Noting that demand for locally-made clothing has increased by 20%, Afsaneh Mehrabi added, “As of last year, the country needed 120,000 tons of cotton. Last year, cotton imports stood at 98,000 tons as 60,000 tons of locally-made cotton were consumed,” Mehr News Agency reported.
“Prices of imported cotton have increased due to the depreciation of local currency. So, efforts made by Agriculture Ministry to increase import tariffs seem unjustifiable. Furthermore, sanctions have made imports even more challenging,” Mehrabi said.
“In the past, Iran used to export 270,000 tons of cotton, but in recent years, cotton production has declined to 50,000-60,000 tons per year,” Alimardan Shaybani, a board member of the Association of Iran Textile Industries, says.
“Given the machinery installed at factories, the country needs to import 120,000 tons of cotton annually. Textile industries consume the locally-produced cotton in its entirety. In fact, they are facing a shortage of cotton,” he said.
“The 5% tariff on cotton imports in Iran comes as producers have to import cotton at the currency rates set in accordance with exchange rates of the so-called secondary FX market, known by its Persian name Nima.”
Ebrahim Hezarjaribi, an Agriculture Ministry official, said setting tariffs on imports will encourage farmers to speed up cotton production.
“Cheap dollars and abolition of import tariffs led to a decline in cotton cultivation from 300,000 hectares to 70,000 hectares in the early 2010s. The removal of tariffs resulted in the closure of 150 cotton mills. At present, only 70 factories are operating at a fraction of their capacity,” he said.
Noting that the country has achieved 40% self-sufficiency in cotton production, the official said, “Iran’s cotton production is estimated to reach 80,000 tons in the current fiscal year [March 2020-21]; land under cotton cultivation will increase to 120,000 hectares next year.”
Domestic Production Thriving
Apparel production in Iran is thriving, thanks to restriction on imports and the rise in prices of foreign brands.
"The share of foreign products has dramatically decreased in the Iranian apparel market due to the ban on imports and a rise in foreign currency rates. Domestic producers have gained more motivation to utilize this opportunity and improve the quality of their products," Morteza Mirmohammadi, an official with the Ministry of Industries, Mining and Trade, has been quoted as saying.
Foreign brands, mainly Turkish ones, are being replaced with quality Iranian products, he added.
The official said this achievement (growth in output and production of quality apparel) has been realized with the import of up-to-date machinery and technology, adding that despite sanctions, high investments have been made in the apparel industry lately.
The average goods and services Consumer Price Index of “clothing and shoes” in the 12-month period ending Jan. 19, which marks the end of the 10th Iranian month, increased by 35.3% compared with last year’s corresponding period.
According to the Statistical Center of Iran, with a coefficient of 4.78%, the CPI of “clothing and shoes” among 12 groups of the basket of consumer goods and services purchased by households stood at 310.2, indicating a 3.4% increase compared with the month before.
The index registered a year-on-year increase of 47% during the month under review.
Hassan Nilforoushzadeh, secretary-general of Iran Textile Industry Association, has told Fars News Agency that 98% of Iran’s textile industry are owned by the private sector, and if it wasn’t so, it would have been banished altogether.
“Our main plight is the huge amount of contraband items that enter the country. It seems that even the police can’t stop the smuggling. Other handicaps are money transactions, foreign exchange restrictions and transportation problems caused by reimposed US sanctions,” he said.
Saeed Jalali Qadiri, the head of Textile and Apparel Production and Exports Union, recently told Mizan Online that, at present, close to $1.8 billion worth of contraband apparel enter Iran every year.
Nilforoushzadeh added that the textile industry has created close to 600,000 direct jobs.
The purchasing power of Iranians have declined in recent years, leading to lower apparel consumption among other commodities. The increase in production of domestic producers could reverse this trend, provided that manufacturers boost the quality and diversity of their products.
$40m Worth of Exports in 7 Months
More than $40 million worth of apparel were exported from Iran during the first seven months of the current Iranian year (March 20-Oct. 21, 2020), according to the deputy head of Textile and Apparel Production and Exports Union.
“This is while over the past few years, our total annual apparel exports hovered between $50 million and $60 million. We estimate that by the end of the [Iranian] year [on March 20], our exports will see a 30% rise compared with last year,” Majid Nami was also quoted as saying by IRNA.
Based on data released by the Islamic Republic of Iran Customs Administration, Iraq, Kuwait, Australia, Armenia, Azerbaijan, Uzbekistan, Russia, Afghanistan, Pakistan, Turkmenistan, Kyrgyzstan, Germany, South Korea, Japan, the UAE, the UK, Venezuela, the Ivory Coast, Italy, Turkey, Canada, Qatar, Oman, Nigeria, Switzerland, Yemen, Georgia, Spain and Denmark were Iran’s main export destinations for these products.
Nami added that the export figure pertains to official and legal exports only and the figures for suitcase trade of apparel, which are considerable, have not been included.
The official said merchants from neighboring countries like Iraq and Afghanistan as well as Central Asian countries have based themselves in different cities of Iran, pay Iranian producers of clothing items in rials and then take the consignments out of the country in either legal or illegal ways, adding that this kind of exports has little profit for Iranian businesses.
Iran exported €15 million worth of synthetic fibers over eight months to Nov. 20, according to the director general of the Ministry of Industries, Mining and Trade's Textile and Clothing Department.
“Exports of Iran’s synthetic fibers stand at 240,000 tons worth €20 million per year,” Afsaneh Mehrabi was quoted as saying by IRNA.
According to parliamentarian, Javad Hosseini-Kia, a total of 600,000 tons of raw materials for production of synthetic fibers are produced domestically annually, of which 550,000 are used inside the country.