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From: Emerging Textiles
10 September 2008 -- Polyester prices further declined in September in India, reflecting a sharp decrease in polyester intermediate prices and a continued weakness in demand, our India Correspondent reports. Prices are nearly back to their level a year ago after significantly decreasing since peaking in July. The current slowdown in India's clothing exports may affect demand for polyester yarns and fibers while domestic clothing consumption is affected by a surging inflation rate in India.
Polyester prices fell 5-8% in September in India.
Prices had touched a peak in July this year before retreating in August and September.
Compared with a year ago, PSF prices are still up 1.50-2% on average while filament prices are mostly unchanged.
PTA, MEG expected to further fall
PTA and MEG prices have recorded a steeper fall in September.
PTA price was down over 8% compared to August while MEG fell almost 14% from a month ago.
The polyester industry expects prices to bottom out by the end of the month, due to a possible stabilization in oil prices.
There could however be a further reduction in these prices in October.
Availability of PTA and MEG remains easy.
Demand Stays Elusive
Although prices have been falling over the last two months, demand for yarn remains very low.
Texturisers were expecting demand to pick up in September but that has not happened.
Leading polyester manufacturers Reliance Industries and Indorama Synthetics have had to cut production.
While Reliance reduced operating rates by around 25%, Indorama’s output is down 40%.
In August, Indorama shut down its plants for three weeks.
From August 25, production has resumed, but not at full capacity.
The company could gradually increase its production to the earlier levels by the end of September.
Prices of textured yarns are expected to continue falling in October, but demand will remain stagnant.
No Relief Expected
Texturisers are not optimistic about market conditions in the coming months.
Power shortages in most of the textile manufacturing clusters have meant a lot of idle looms.
The synthetic fabric manufacturing centre, Silvassa has closed down once a week in August due to the power situation.
Similar difficulties are reported in Bhiwandi, the country’s largest powerloom cluster.
The textile industry also faced a short supply of dyes and chemicals.
Domestic suppliers had been exporting to meet the very high requirements of China during the Beijing Olympics.
Processing activity in India is slowly coming back to normal. But still, large quantities of grey fabrics are in the pipeline.
Garment exports could be further affected
The government has brought down the duty drawback rates following continuing dollar appreciation since the beginning of the 2008-09 financial year.
Since April, the rupee has depreciated 10% against the dollar.
Duty drawback is a scheme by which exporters are refunded a part of the various duties they pay for production.
The finance ministry had increased the drawback rates for exporters in the beginning of the year, when the rupee had appreciated by over 10% against the dollar, making Indian exports uncompetitive.
There are however fears that higher raw material costs and a lowering of the drawback rates could adversely impact apparel pricing for the export markets, thus making Indian exports uncompetitive.
The economic slowdown in the US and Europe has also meant lower apparel export orders for India.
Clothing export growth would be down to just 4-5% according to exporters, against 9-10% last year.
Texturisers have recorded lower demand from apparel manufacturers as a result.
With India's inflation rate rising, domestic apparel and fabric consumption is also stagnant, further impacting yarn consumption.
Production Is Slowing Down
Polyester production in India has slowed down in the first quarter of the new fiscal year 2008-09.
PSF production fell 4.26% during April-June 2008 at 207.75 million kg.
By contrast, polyester filament yarn production was 356.51 million kg, up 4.72% over the same period last year.
However, the rise is much weaker than the 12.50-13% growth recorded in the previous periods.
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