Cotton yarn export picks up on robust demand

Cotton spinners, earlier stuck in a lurch, are now turning profitable due to good demand from international and domestic markets.

With high cost inventory due to volatility in cotton prices coupled with weak demand, they purchased cotton at very high prices in early part of the year. This caused many mills to shut down part of their capacity, or stop production on a whole.

But now prices seem to have eased, and because of a falling currency, export demands saw a significant rise.

In November, exports were up by 75 per cent to 76.36 million kgs as compared to 43.69 kgs in October, according to the data by Directorate General of Foreign Trade.

Currently, only 75 per cent of the spinners are working, but they will increase production soon.

“Currently garment orders are coming in. This would indirectly increase the demand for cotton yarn. Once demand picks up then mills would be able to increase their production capacity,” said D K Nair, secretary general of Confederation of Indian Textile Industry (CITI).

In November, cotton yarn demand emerged in a big way from China, Bangladesh, Sri Lanka, Vietnam and Egypt.

The rupee’s depreciation also came as an aid to exporters . Cotton prices have also started coming down since the last few months. 30's combed, which is the benchmark variety of cotton yarn for exports were priced lower at Rs 158 per kg compared to Rs 170 per kg in the previous month in domestic market while for exports in dollar terms it was even cheaper for buyers.

“Currently, since the price of cotton yarn has again gone up to Rs 172 per kg, demand has reduced, but inquiries are still pouring in,” said Bharat Malkan, a Mumbai based cotton yarn trader.

“Mills which were forced to shut down earlier may start again in the next 15 days to 1 month, also the mills which were forced to reduce its production will resume to normal,” Bharat Malkan said.

Earlier in the year, spinners were forced to sell cotton yarn below the production cost as they had to get rid of the high cost inventory they were stuck with, as then cotton price of the benchmark variety, Shankar 6 was as high as Rs 55,000 per candy (I candy = 356 kgs) when they purchased it, later cotton prices saw a steep fall which pushed spinners to sell yarn at a cheaper rate.