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Cotton yarn exports this financial year has started to witness a decline due to weak demand from China, the largest importer of India's cotton yarn. Cotton yarn exports this fiscal in the month of April fell to 99.92 million kilograms compared to 115.96 million kilograms during the same time last year, according to data released by Directorate General of Foreign Trade. the fall has continued even after April and stocks started piling up with the spinning mills/ although mills have yet not reduced capacity utilisation.
Dollar appreciation against the rupee has made Indian cotton yarn not viable to importers as it has now become heavier on the pocket. At the start of the fiscal, the Indian currency stood at Rs. 59.89 per dollar. The dollar hit a high of Rs. 61.09 per dollar in April.
"China's demand for cotton yarn has dropped considerably in the last two months and this is expected to continue due to a change in China's policies. Margins on some products are negligible at the moment, while some products are selling at a loss as well," said S P Oswal, chairman of Vardhaman Group.
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China is likely to decontrol its cotton from August onwards, which will impact India's cotton yarn exports going ahead. Currently, there has been some level of stock pile up with Indian cotton yarn spinners, added Oswal.
"India's cotton yarn exports have been lower by 10- 15 million kgs and that is mainly due to a slowdown observed in China, we expect this to continue for some more months. China has also reduced their fabric production currently due to which yarn imports have been impacted," said D K Nair, secretary general of Confederation of Indian Textile Industries.
Nair also added that there has been a stock pile up of cotton yarn, but capacities are not lying idle yet and is expected to revive in the next two months.
In the last two financial years, India's cotton yarn exports have been above 1000 million kgs. Last year, India's cotton yarn exports stood at 1414.53 million kgs while in FY 2012-13, it stood at 1109 million kgs.
Cotton yarn prices for benchmark 30's combed is currently priced at Rs 217 per kilogram and prices have witnessed a fall in the last fifteen days. For export it is priced at $3.50 per kilogram.
Demand for yarn has been weak at these price levels due to which it has fallen. The appreciation in the dollar has also caused demand to fall.
"Since the start of the current fiscal, demand for cotton yarn has been on the lower side from international buyers, especially China and this trend is expected to continue for the next few months as well,"said Bharat Malkan, a Mumbai based cotton yarn trader.
Once the festive season kicks in, spinners hope for a revival in cotton yarn demand. Also, hopes are pinned the revival of the US and Euro Zone economy which will also have an impact on India's cotton yarn demand.
