Domestic denim exports wear out

Lack of adequate capacity dents show

If figures could tell the story, denim manufacturers wouldn`t have fond memories of 2005. While most competitors across the world reported a strong rise in denim exports to US, growth in domestic denim exports has been negligible.

Statistics provided by the US Office of Textiles and Apparels (OTEXA) show a mere 6 per cent rise in denim exports to the US in the calendar year 2005, compared with the staggering 1,044 per cent growth registered by China. Turkey too recorded a healthy 63 per cent growth. The only consolation is Pakistan, whose denim exports to US slid 7.9 per cent.

Domestic denim exports grew from 5.84 lakh metres in 2004 to 6.2 lakh metres in 2005. For the same period, Chinese denim exports to the US shot up from 6.62 lakh metres to 75.7 lakh metres, and Turkish denim exports increased from 24.9 lakh metres to 40.8 lakh.

According to industry observers, the figures also reflect a change in equation after textile quotas were scrapped in January 2005.

On the domestic markets, denim makers are facing stiff pricing pressures. "Due to capacity additions and cancellation of a few orders, denim prices have fallen," said Kapil Bagaria, analyst at Sushil Finance.

Arvind Mills reported a drop in its price realisation from Rs 104 per metre a year ago to Rs 99 now. Aarvee Denim also saw prices slide from Rs 90 to Rs 87 per metre. The industry average, according to analysts, has dipped from Rs 98 to Rs 89 per metre. Surprisingly though, the outlook for the segment is positive.

Observers expect the prices to pick up after March along with an expected increase in demand. "By then the export orders would have come," said an analyst.