MUMBAI (Commoditiescontrol) – Domestic cotton yarn industry continues to reel under pressure from weak demand in the local markets besides subdued queries from overseas/export market. Low demand and piling inventory have threatened the very existence of small mills, which are forced to closed down their spindle lines. Big players sitting on previously earned profits and have adequate marketing set up, are continuing with their operations, hoping on better prospects in the future.
Prices of 30 to 60 count corded yarn have eased Rs 10-12/kg in last one month. There should not be any surprises if prices drop further in the near future.
Industry bigwigs have echoed their concerns about the prevailing market conditions and worried about its future course of action.
Mr Ashok Kapoor, General Manager of Ludhiana based Nahar group told commoditiescontrol.com that if we talk about cotton yarn industry, export demand was very weak while we were forced to reduce prices for domestic market. Currently, inventory level stands at as high as 20 days to one month. Entire, industry is reeling under pressure and facing cash loss. Many mills are not interested to sell yarn at very low price because such sale might increase cash loss. The mills were producing yarn in full capacity. If they reduce production, their cash loss might increase. But, he opined that production cut is a better strategy. North Indian mills are financially sound so they are not likely to cut production very soon. According to Mr Kapoor, china’s purchase for yarn will not increase in the near future. It will use domestic cotton stock to avail yarn in sufficient quantity. So, there might be more pressure on Indian industry. Cotton yarn declined Rs 20/kg in last one month. The prices are not likely to improve.
Mr N K Agrawal, Chairman cum Managing Director of Indore based Jaideep Group of Companies said that yarn manufacturers were facing hardest time of this year. yarn export was almost halted and domestic markets were less supportive due to financial crunch. He says that China was releasing it’s old stock fearing that it might get perished. Hence, Chinese mills are producing yarn using locally sourced cotton. No consumer industry from China is interested to buy Indian yarn. As a result of which, the small manufacturers are hit severely by the scenario. Meany spindle line operations are discontinued. Hence, average inventory of yarn increased to 15 to 45 days. Therefore, it is clear that the condition of yarn industry is below par.
He said that Cotton Corporation of India (CCI) must release good quality cotton. Although, CCI was selling cotton at lower price but the mills are purchasing to meet their immediate needs. No mill is interested to buy more cotton. He said that cotton prices may drop to Rs 28,000 per candy (360 kg in each) in next season if we take account of current stock and next expected crop. According to Mr Agrawal, corded yarn prices for 30 to 60 counts declined Rs 10-12/kg in last one month. Similar decline in prices are expected going further. It is absolutely necessary to keep spinning mill running, no matter if the industry has to bear losses.
An official of a north Indian textile mill said on condition of anonymity that India produces around 60 lakh kg yarn on a daily basis. However, as per the data available on the Ministry of Textiles Industry's website, the country produces approx 1.00 crore kg yarn on a daily basis. Maximum stock is held as warehouse inventory as an outcome of weak exports and domestic demand. Indian yarn industry was fully dependent on Chinese market, which has limited its buying from other countries. Although, we were exporting yarn to the countries like, Latin America, Europe, Pakistan, Bangladesh, Israel and Vietnam but their demand is not strong enough to support industry. Yarn prices may fall further because there was no hope for better demand.
An official from Ahmadabad based Ashima Group told on the basis of anonymity that the industry is facing weak demand from export as well as domestic market. Although, domestic demand for yarn was better from fabric side but cash flow was very tight. There is no hope for improvement in export demand in the near future. According to the official, big players have strong marketing set up and hence they can survive in the current recessionary scenario. They don’t have to face too serious problem because of advance orders. But small manufacturers are forced to go out of the market and the trend is not likely to change sooner or later. Given the expected decline in Cotton yarn prices in the near-future, the CCI should intervene and provide cotton on easy conditions. That would help small players to come over current crisis. Although, cotton prices dropped from Rs 37,000 to Rs 35,000 per candy. But the prices are high as compared to present market situation.
Mr Ashok Daga, former president of South India cotton Association, Coimbatore said that normally cotton demand remains weak in August but this year the conditions are visible in June itself. According to Mr Daga, there were festivals in August and rain also affects activities so yarn demand remains weak in the month. The activities in power looms were sluggish this year due to excessive heat. Power looms are covered with tin shade and hence they became very hot. There are difficulties of engaging workers in production. Month of Ramzaan will start shortly so there might be labour problem. Mills will have to work with lower capacity. Mr Daga said that entire industry was effected due to closure of processing units in the centers like Pali-Balotara, Sanganer and Kolhapur. There was no demand for yarn from China and buying from smaller countries was not visible either. He informed of 30 to 60 counts corded yarn prices dropping 10 per cent and expects sharp fall in prices in days to come. This is because, the demand Southern Indian mills starts late, but they are sitting on inventory of 30 days.
Mr Kamlesh Patel, Managing Director of Gopinath Spinning Private Limited, Vadodara told that yarn market is under pressure. Export inquiries were very limited. Yarn market was directly affected from weak demand of cloths. Yarn stocking might also be risky because of weak demand. The inventory increased to two months from 15-20 days. Yarn demand declined from China and other countries so manufacturers were selling yarn at lower price. Mr Patel said that spinning industry is facing over capacity. Weak demand has compounded problems for the industry. Cheaper prices of cotton is necessary for the industry to get some respite.
(By Commoditiescontrol Bureau; +91-22-40015533)
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