Rise in polyester raw material prices impact margins of yarn makers in India

The two key raw materials Purified terephthalic acid (PTA) and mono-ethylene glycol (MEG) used in making synthetic yarn although have remained low globally but in India the same have risen by Rs 10-15 per kg in recent past and have remained at high levels putting Indian yarn makers’ margins under pressure.

According to synthetic textile makers, while crude oil prices may have continually declined, that of polyester raw materials such as PTA and MEG, that emerge out of crude oil have not correspondingly corrected. This, as a result, has led to prolonged high raw material prices which have led to unchanged yarn prices. This has impacted the margins of synthetic yarn and fabric players by 10-15 per cent.

Jitu Vakharia, president of South Gujarat Textile Processors Association (SGPA) said that while crude oil prices have been falling, it is not getting translated into fall in polyester raw material and yarn prices. There is a disparity in the prices of crude oil and polyester raw materials like PTA and MEG as well as polyester yarn which has left the synthetic textile making industry reeling under low margins pressure.

In domestic market , polyester yarn raw materials prices, which are basically melt cost of PTA and MEG, are at Rs 120-125 per kg levels as against international prices which are at Rs 115 per kg levels. According to industry sources, the prices are termed as melt cost for PTA and MEG.

According to industry players and experts, domestic prices of PTA and MEG saw a steep rise and have even crossed international levels.
There are very few manufacturers and suppliers of the polyester raw materials PTA and MEG for making synthetic yarn. Yarn makers were mostly dependent on domestic raw materials but with prices rising steadily since last three months, they are being forced to go for imports.

However, speaking on the sidelines of an international textile conference in Gandhinagar recently, RD Udeshi, President (Polyester Chain) at Reliance Industries Limited (RIL) said that the raw material prices in the polyester chain have responded to the crude oil prices. If the crude oil prices in recent past have fallen by 30 percent, raw material prices too have fallen proportionately.