Surge in cotton prices in domestic market drive textile mills to import

With the jump in cotton prices in the country, there is a spurt in import contract as textile mills have started importing cotton from West Africa and the US as the landed costs are on par with the prevailing domestic market price.

Cotton prices have gone up by Rs 6,000 per candy (a candy is 355kg) or 15.8% since November. Price of the popular Shankar-6 cotton had on an average increased by Rs 2,500 per candy in the past two months and is now trading at Rs 44,000 per candy.

According to industry officials, the textile mills have contracted to import about 15 lakh bales (a bale is 170kg) of cotton and it might touch 30 lakh bales at the end of the season, if the present trend of import continues.

K Selvaraju, secretary general, Southern India Mills’ Association (SIMA) said that spurt in import contracts is seen as domestic and imported cotton prices are more or less at same levels.

Imported cotton appears to be attractive due to better yarn realization, productivity and quality, said M Senthilkumar, chairman, SIMA. The Cotlook A index, the global benchmark for cotton prices, which by and large ruled at 79 cents per pound in October, is now quoting about 87 cents.

The cotton arrival as on March 20 was around 250 lakh bales, compared to 260 lakh bales during the same period last year. Textile mills in the country consume around 25 lakh bales of cotton per month. Mills in the south alone use about 10 lakh bales a month. Mill consumption might be around 295 lakh bales as against 303 lakh bales estimated by CAB, Senthilkumar said.

Exports are also likely to be lower than CAB estimates as desi cotton prices are not currently attractive in the international market. Exports would be only around 40 lakh bales, compared to 50 lakh bales estimated by CAB, the SIMA chairman said.

A bumper cotton crop in Australia and the US would also help in keeping prices under check as there is a significant increase in cotton crop size in Australia, expected to be around 45 lakh bales as against 28 lakh bales last year, and 18% increase in crop in the US. Since China has restricted its imports, global cotton position is very comfortable, Senthilkumar said.

SIMA has asked spinning mills not to panic as cotton availability, both in domestic and global markets, is comfortable. Cotton production in India for the 2016-17 season is pegged at around 345 lakh bales as against 351 lakh bales estimated by the CAB last October.

Incidentally, mills had imported cotton from West Africa last year too after the sharp increase in prices in the domestic market

Atul P Asher, secretary, Indian Cotton Federation (ICF) said that textile mills had been entering into contracts to import cotton, mostly from West Africa, for the past couple of days.

.