Demand for yarn is likely to revive in the next few weeks, when power looms begin honouring orders for the festive season, providing relief to the ailing spinning industry. Power loom production is expected to increase by the second week of June.
In recent months, their activity had reduced as cotton prices reached exorbitant levels. After hitting a high of Rs 63,000 a candy (a candy is 356 kg) in February, these have since stabilised to Rs 45,000 per candy.
Power loom production has fallen by half in recent months due to the volatility in prices, which had caused weavers to stop buying yarn, said Bharat Chhajer, chairman of the Powerloom Development & Export Promotion Council. Yarn had been bought at high prices but fabric had to be sold at lower prices. Even exports were dull. The net result was a serious problem for yarn spinners.
“In the last quarter, the government had capped cotton yarn exports at 745 million kg, that caused many international buyers to import from China, Bangladesh and Pakistan,” said R Sundaram, president, finance, and company secretary of Indo Count Industries.
The ceiling has since been raised to 845 million kg but international demand is weak, causing prices of cotton and cotton yarn to ease.
With these early signs of stabilising, the demand for yarn will pick up in the domestic market. The current price of cotton yarn, for the benchmark 40’s combed variety is Rs 220 per kg, compared to Rs 250 per kg a month before.
“Demand has already started to show early signs of recovery. Earlier, demand was slack as buyers were hoping for a further fall in cotton and cotton yarn prices,” said Mitesh Shah, vice-president, finance, Mandhana Industries.