Viscose price surge stretches exporters

The rising prices of viscose fibre has hit the bottomline of spinning mills and exporters of viscose spun yarns.

In last four months, the price of viscose fibre has gone up by 15 per cent. Other factors like appreciating rupee, increase in ocean freight rate and reduction in DEPB have effectively pushed up production cost of yarn by 21 per cent. Exporters have been able to pass on only 15 per cent increase to overseas buyers.

More importantly, the price gap between cotton yarn and viscose spun yarn has reduced considerably in last two months. Viscose yarn has always been priced lower than cotton yarn.

"Lower price makes a man made fibre like viscose more attractive than cotton. If the gap between two narrows further, viscose demand will fall," an expert said.

Cotton yarn prices in international market has declined by over 20 per cent in last two months. The price of viscose yarn was at $ 2.40-2.45 a kilogramme and of cotton yarn about $ 2.65-2.70/kg.

The medium term outlook for cotton prices is stable till the new crop arrives in October. The possibility of further upside in the viscose fibre prices would be kept in check by the cotton price graph.

"We expect the domestic producer of viscose fibre to take stock of the situation and reduce price. Maintaining long term export obligation has really become a challenge," Manish Kumar, managing director of Ritspin Synthetics, the largest exporter of viscose spun yarn from India, said.

"Since there is no import of viscose fibre abolition of four per cent SAD did not help us. As a fallout, government reduced DEPB incentive on export which hit bottomlines," he added.

Ocean freight rate for 40-feet container had risen more than 30 per cent in the last four months. Companies producing value added items have able to absorb rising input prices better, while those exporting basic goods being hit the hardest.

Production of viscose fibre in India was around 200,000 tonne per annum. Grasim was the single largest manufacturer.