Cotton yarn exports decline

Cotton yarn export is on the decline this financial year, thanks to weak demand from China, the largest importer of India’s cotton yarn. The export fell to 99.92 million kg in April this financial year compared to 115.96 million kg  during the same period last year, according to data released by Directorate General of Foreign Trade. The fall has continued even after April and stocks started piling up in the spinning mills, though mills have yet not reduced the production.

Dollar appreciation against the rupee has made Indian cotton yarn not viable to importers. At the start of the financial year, rupee stood at Rs 59.89 per dollar. The dollar hit a high of Rs 61.09 per dollar in April.

“China’s demand for cotton yarn has dropped considerably in the last two months and this is expected to continue due to a change in China’s policies. Margins on some products are negligible at the moment, while some products are selling at a loss as well,” said S P Oswal, chairman of Vardhaman Group.

China is likely to decontrol its cotton from August, which will impact India’s exports. Currently, there has been some level of stock pileup with Indian cotton yarn spinners, added Oswal.

“India’s exports have come down by 10- 15 million kg and that is mainly due to slowdown in China. We expect this to continue for some more months. China has also reduced their fabric production currently due to which yarn imports have been impacted,” said D K Nair, secretary general of Confederation of Indian Textile Industries.

In the last two financial years, India’s cotton yarn export has been above 1,000 million kg. Last year, the export stood at 1,414.53 million kg, while in FY 2012-13, it stood at 1,109 million kg.  Cotton yarn prices for benchmark 30’s combed is currently priced at Rs 217 a kg and prices have witnessed a fall in the last 15 days. For export it is priced at $3.50 a kg.  Demand for yarn has been weak at these price levels due to which it has fallen. The appreciation in the dollar has also caused demand to fall.

“Since the start of the current financial year, demand for cotton yarn has been on the lower side from international buyers, especially China and this trend is expected to continue for the next few months as well,” said Bharat Malkan, a Mumbai-based cotton yarn trader.

Spinners hope for a revival in cotton yarn demand once the festival season sets in. Also, revival of the economy of the US and euro zone will help spur demand.