Rising cotton usage dents polyester demand

Spinners opt for more cotton yarn as PSF prices get volatile

Polyester staple fibre (PSF) demand has gone down dramatically in the last two weeks because of excessive use of cotton by spinners given its relatively steady price vis a vis polyester staple fibre (PSF).

As a result, a number of polyester staple fibre spinners have increased their cotton percentage in yarns, while others have shifted to produce 100 per cent cotton yarn.

"Generally, cotton and polyester spinning mills go side by side and whenever there is shortage of PSF, spinners switch over to cotton and vice-a-versa.

So, this is a temporary phenomenon which would overcome very soon," said an official with Indo Rama Synthetics. This cycle takes place every often when the demand of cotton and polyester mismatches.

Polyester staple fibre prices, however, remained volatile during the last calendar year and moved between Rs 65 and Rs 70 per kg throughout the year. Rising international oil prices have hit raw materials used to manufacture polyester staple, MEG and PTA prices adversely, thereby, hitting the output of polyester staple.

Cotton prices, on the other hand, have eased substantially owing to encouraging output forecast from leading cotton growers worldwide. Global cotton output in the marketing year 2005-06 (August-July) is estimated at 111. 7 million bales, down 7per cent from previous season's output.

Consumption is estimated to total at 114.4 million bales, 5 per cent higher than that of last season, thereby a supply deficit in the market. (1 bale=170 kilograms). Against that Indian cotton production is estimated to surge to 250 lakh bales this year against 243 lakh bales in 2004-05.

Surprisingly, the import (C.I.F) price of polyester staple fibre is lower than domestic prices, especially while importing from Europe and the US, especially considering premiums which are paid in India and China, a trader said.

Buyers need delivery soon and, therefore, spinners have no choice but to use whatever the material available in the market to meet the delivery schedule. Importers such as Walmart always prefer to see the consignment coming as soon as possible, otherwise they switch over to other spinners.

Hence, spinners always prefer to meet delivery deadline rather than maintaining the percentage use of material, said the Indo Rama Synthetic official.

Domestic cotton prices are bound to go up in tandem with world prices, therefore, the temporary makeshift would force spinners to come back to their original mixture, he added.