Cotton yarn spinners witnessing stocks pilling but capacities are not lying idle yet

Indian cotton spinners have started to witness stocks pilling up due to weak demand from China, the largest importer of India’s cotton yarn. Cotton yarn exports this fiscal in the month of April declined to 99.92 million kilograms compared to 115.96 million kilograms during the same time last year. The fall has continued even after April, according to data released by Directorate General of Foreign Trade.

Dollar appreciation against the rupee has made Indian cotton yarn not viable to importers as it has now become heavier on the pocket. At the start of the fiscal, the Indian currency stood at Rs. 59.89 per dollar. The dollar hit a high of Rs. 61.09 per dollar in April.

There is a considerable decline seen in the last two months in the China’s demand for cotton yarn and is expected to continue due to a change in China’s policies and China is likely to decontrol its cotton from August onwards, which will impact India’s cotton yarn exports going ahead. Currently, there has been some level of stock pile up with Indian cotton yarn spinners. Margins on some products are negligible at the moment, while some products are selling at a loss as well, stated S P Oswal, chairman of Vardhaman Group.

According to D K Nair, secretary general of Confederation of Indian Textile Industries, India’s cotton yarn exports have been lower by 10- 15 million kgs and that is mainly due to a slowdown observed in China, they expect this to continue for some more months. China has also reduced their fabric production currently due to which yarn imports has had a impacted. There has been a stock pile up of cotton yarn, but capacities are not lying idle yet.

Spinners hope for a revival in cotton yarn demand, once the festival season starts off. Also, hopes are pinned the revival of the US and Euro Zone economy which will also have an impact on India’s cotton yarn demand.

In the last two financial years, India’s cotton yarn exports have been above 1000 million kgs. Last year, India’s cotton yarn exports stood at 1414.53 million kgs while in FY 2012-13, it stood at 1109 million kgs.

Cotton yarn prices for benchmark 30’s combed is currently priced at Rs 217 per kilogram and prices have witnessed a fall in the last fifteen days. For export it is priced at $3.50 per kilogram.