Falling prices of yarn prompt stock pile-up

Smaller companies face financial crunch, ask for help

Textiles mills have little to rejoice about the recent fall in synthetic yarn prices, following the decision of fabric buyers and garment manufacturers to cancel previous orders.

According to industry insiders, fabric buyers and garment manufacturers placed orders at a time when the yarn prices were high and are now demanding a scale down in prices following the fall in prices of both natural and synthetic yarn.

Many textile mills, which were depending on the export market, are facing similar situations with overseas buyers turning their back. Mills are left with a huge stock of unsold product.

 

As a consequence, small and medium mills are passing through a severe financial crunch. "If the situation does not improve, the mills are going to have a tough time in the days ahead. The problem needs to be addressed immediately," said an industry source.

Synthetic yarn prices are down 20 per cent in the past one-and-a-half months. Prices of the benchmark 80 Denier roto prices have fallen to Rs 105 per kg from Rs 131 a month ago - a decline of 22 per cent.

While some of the bigger mills like Gokaldas Exports are working on new strategies to expand their business in the domestic markets, many small- and mid-size mills are finding it difficult to cope.

An official of a leading textile mill said: "Demand has been affected because buyers are expecting yarn prices to fall further. However, the demand for synthetic yarn seems to be looking up."

In the aftermath of the earthqake and tsunami in Japan, Indian textile manufacturers had expected overseas demand to increase. The general impression in the industry was that China would not be able to fulfill the demand in yarns globally, because it imports Purified Terephthalic Acid (PTA) - the raw material used in the production of polyester fabric - from Japan. However, China's exports to the global market was not affected.

The prices of PTA in international markets have fallen from $1,500 per kg in March to $1,225 per kg - a decline of 18 per cent. Yarn prices have also declined globally.

"Traders, who usually stock for up to two to four weeks, are not stocking up any more due to the volatility in prices. They have sold previous stocks at whatever prices they could get," said Jaykrishna D. Pathak, president of the Bombay Yarn Merchants Association.

Textile mills are keeping their fingers crossed and hoping PTA prices do not fall further. "A further fall in prices of synthetic yarn is not likely even if demand is weak because crude oil prices are not expected to fall in the near term. Most raw materials used to manufacture synthetic yarns are crude oil-based. Even if it does, it will fall only by Rs 3 to Rs 4 per kg," said Pathak.