As capacities are rapidly expanding

Cotton yarn prices steady in India, demand buoyant Statistical Report

Demand for cotton yarns is very strong in India, in line with a rapid expansion in textile and clothing capacities. Prices are steadily rising, especially for coarse counts, our India Correspondent reports.

- From our India Correspondent Raj Menon

Cotton yarn prices continue to remain almost stable in India, even as coarse counts witnessed a slight increase in prices while prices of the finer cotton counts remained unchanged or fell in some cases.

This reversal of trend in coarse count prices has been due to the seasonal demand rising for such counts.

More generally, the trend in cotton yarns has been good. The demand for cotton yarns is on the rise, as capacities for fabrics and garments increase.

Export markets for Indian textiles are also good, further boosting demand for cotton yarns in the domestic market.

More textile investment

A number of cotton spinning units have expanded capacities.

South-based Suryajyothi Spinning Mills has recently completed expansion and modernization of its value added cotton yarn spinning facility, with an investment of US$ 6.22 million.

The company has added 7,056 spindles to its existing unit in Andhra Pradesh, taking total spindleage to 62,416. And the spinner is planning to set up a new facility with a spindle capacity of 25,200 spindles, with a further investment of US$ 11 million.

Another leading manufacturer of cotton yarns, Alps Industries, is setting up a strong retail network in the country, to tap the emerging opportunities in the domestic textile industry.

Through this retail network, the company aims to better service its textile manufacturing clients.

Lower demand on export markets

Contrasting with the strong demand for yarns in the domestic market, export markets are witnessing a sluggish trend.

Prices in the international markets have not remained as lucrative for many Indian mills.

For instance, for 30s combed yarn, prices are quoting in the range of US$2.60-2.65 per kg CNF to Korea and are 15 cents higher for the European market.

Similarly, for 40s combed yarn, the price to Korea is around US$2.90-3.00 per kg CNF, and 15 cents higher for Europe.

This slowdown is expected to continue due to the oncoming holiday season in Europe starting August, and India’s exports to this market would slow down from July onwards.

This, to some extent, could impact the demand and prices of cotton yarns in the domestic market.

Duty-free machinery import requested

Meanwhile, with investments in compact spinning on the rise, the industry is requesting the government to allow duty-free imports of compact spinning machines and projectile looms.

The dismantling of quotas, and the clamping of restrictions on China’s exports to the US, has resulted in very good business opportunities for the Indian textile and clothing industry.

However, the machinery needed to convert the raw materials (yarns) into finished products is pegged at a very high import duty rate.

It may be noted that the ministry of textiles, under its Technology Upgradation Fund Scheme, is already allowing imports of a number of machines at five per cent import duty. However, compact spinning machines are still not included in this list.

Higher cotton prices in next season

Market analysts believe that the cotton situation in the next season could be slightly unfavourable for cotton yarns.

China and the US are expected to have lower cotton outputs, which could result in higher exports of cotton from India, thus tightening the cotton availability for the local industry.

Also, imported cotton could be of a higher price, thus impacting the price of the yarns too. And demand for cotton yarns is not expected to go down for some time.

While the current increase in the price of coarse count yarns is seasonal, this could well become a norm, with the production of short staple cotton falling. India produces around 2 million bales of short staple cotton.

Lack of short staple cotton

Farmers are losing interest in this variety as the yield is not high, and are instead increasingly moving toward medium and long staple varieties and Bt cotton. Seed producers are also losing interest in this variety of cotton.

This could well result in a short supply of short staple cotton from the next season itself.

The industry believes that the cotton research agencies need to develop high yielding short staple cotton seeds, so the increasing demand for such varieties is met locally, and the industry does not have to depend on imports.

It is expected that the industry will work closely with these agencies for the cotton season 2007-08.

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