Denim prices won't fall despite cheaper cotton

After increasing prices by almost 30 per cent in the last one year following high cotton prices, denim prices are now stabilising.

During the period, cotton prices were up over 50 per cent. In the last fortnight, cotton prices have corrected by 15 per cent, and are trading at Rs 54,000-55,000 per candy.

However, denim makers are not considering reducing prices for now as their costs have not come down to a large extent.

Cotton prices in the spot market have stabilised and the benchmark, Shankar 6 variety is quoted at Rs 56,000 a candy (1 candy = 356 kg). Companies are not expected to revise their prices downwards as strong demand for the fabric is expected.

Spokes person of CARE, a rating agency, said, “CARE does not foresee any possibility of prices moving up as cotton prices have eased in the last month.

At the same time, companies are not looking to reduce prices in the near future as demand scenario is favourable at this stage.” CARE rates some denim makers also.

Denim fabric prices are expected to stabilise after witnessing a consistent uptrend in 2009-10 and 2010-11 due to high cotton prices.

Currently, denim fabric costs Rs 130-170 a meter in the domestic market and the export price is at Rs 180 a meter.

Arvind Mills raised denim prices by 30 per cent in the last three months. Aarvee Denims, also raised denim prices by 40 per cent in the last one year.

“Despite high prices of denim, export demand has been good,” said Utsav Pandvar, chief financial officer, Aarvee Denims.

Arvind Mills’ total share in the denim market is 24 per cent, Aarvee Denims’ share stands at 12 per cent and K G Denims at five per cent.

The lower-end denim manufacturers are the one who have been hit as they are seeing weak demand for the fabric. Companies are not expected to cut prices. But, Aarvee Denims may cut prices if cotton prices decline further from the current levels.