High raw material prices hit synthetic yarn industry

With prices of two major raw materials viz. purified terephthalic acid (PTA) and mono ethylene glycol (MEG) being raised again, the synthetic yarn industry is reeling under shrinking margins. According to industry players, while the raw material prices have risen by Rs 5 a kg, synthetic yarn like polyester textured yarn (PTY) can only be raised by Rs 2 a kg, thereby affecting margins of yarn players.

While PTA rose by Rs 4.40 a kg, MEG prices have risen by Rs 2.50 a kg. However, according to Dhirubhai Shah of the Surat-based Fairdeal Filament, a synthetic yarn manufacturer, the overall impact of rise in raw material prices will come to around Rs 5 a kg.

 

According to Shah, almost all PTA and MEG providers like Reliance, Mitsubishi and IOC have increased prices of the raw materials by close to Rs 5 a kg. This is the second rise in the last two months.

“Prices of PTA and MEG were raised by Rs 2 a kg in August. This is the second month that prices have risen. With cotton prices dropping gradually, prices of synthetic yarn have been rising again, thereby impacting demand for the latter,” said Shah. Currently, the average PTY price is Rs 110-150 a kg.

Surat alone manufactures about 70,000 tonnes of PTY synthetic yarn per month, resulting in an average monthly turnover of about Rs 900 crore.

“Raw material prices have risen at a time when the synthetic yarn is facing competition from cotton. And while, raw material prices have risen by Rs 5 a kg, the final yarn cannot be hiked by more than Rs 2 a kg. This is going to pinch the synthetic yarn industry since margins will shrink to that extent," said Jayesh Pathak, president, Bombay Yarn Traders Association.