Fabric prices rise on weaker rupee

Since April, prices of raw materials needed to spin yarn have risen 17-18%

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Fabric prices are rising, following the sharp increase in raw material costs. And, the rise is already being passed on to consumers by small weavers, as well as large companies. The cost of synthetic fibre has been rising on a sharp fall in the rupee, and this has increased costs of petrochemicals such as purified terephthalic acid and mono ethylene glycol, raw materials used to make fibres. Simultaneously, cotton prices have also increased.

While the increase in raw material costs has been a big hurdle for fabric makers, “An improvement in the situation, led by the export demand, has given some comfort to textile players to pass on the increasing costs of raw material. The textile sector, as a whole, is coming back to the growth path,” said D K Nair, director general, Confederation of Indian Textile Industry.

Since April, prices of basic raw materials needed to spin yarns have risen 17-18 per cent, while man-made and cotton yarn prices have risen only 13-15 per cent. However, fabric prices, for synthetic as well as cotton fabric, rose only four-six per cent. Now, yarn-weaving companies are optimistic about passing on costs by increasing prices, as the overall scene seems to be improving, led by an export boom.

Rupee fluctuations will be deciding factor for raw material prices in coming months. Chua Sok Peng, Managing Editor, Asia Petrochemicals, Platts, said, “India is very sensitive to fluctuations in the rupees these days. Any fall in the currency will stem imports especially if the product is meant for local consumption rather than re-exports.” Standalone plats believe that, “the paraxylene, is expected to be oversupplied. We currently see PTA prices range-bound, and the MEG price is closely tied to China inventory level and the availability of tank space.”

A senior executive of a large integrated textile company involved in cotton and synthetic fabric business, said, “Now, with every order, new prices for fabric are quoted, as the demand scene is looking good.”

In Surat, a hub for small and big processors, including yarns, weavers and fabric makers, while larger players have been able to pass on the rising costs, the process has been slow. However, “demand for textile is looking up in view of coming festivals and a good monsoon, along with rising export orders that could help raise fabric prices,” said Dhirubhai Shah of Surat-based Fairdeal Filament. He, however, said due to the inability of weavers to pass on entire costs, investments in weaving were on a standstill in the last two years.

Nair said with the revised Technology Upgradation Fund Scheme coming into force soon, investments in the weaving sector would also start coming in. Interest rate subvention and improved prospects for the textile sector would also aid the industry.

“If synthetic yarn prices remain high, at some point, incremental demand could start shifting to cotton yarns. If cotton and man-made fibre both remain costly, users have few choices.” Currently, two-thirds of the Indian textile industry’s consumption is accounted by cotton.