Textile mills happy over rising cotton yarn demand

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Namrata Kath Hazarika | 21 Sep, 2011
The Indian textile mills, after facing severe downturn in the last few months due to the fall in cotton yarn prices, are now witnessing revival in demand of cotton yarn and their inventory level has reached a normal level, said the Southern India Mills' Association (SIMA).

"The yarn inventory has reached a normal level and in many spinning mills even less than the normal level indicating an increase in the demand for yarn," SIMA Chairman S.Dinakaran said in a press release issued on Wednesday.

He added that the festival orders have picked up and therefore, there is a significant improvement in the cotton yarn market scenario.

The government last year imposed restrictions on cotton yarn exports to a tune of 720 million kg due to which there was huge accumulation of yarn stock of 500 million kgs as against the normal level of 100 million kgs. This ban has been lifted by the government recently.

Normally, Indian spinning mills export around 23% of its production ranging from 55 to 70 million kgs of yarn per month. As the export could not happen, the yarn inventory started piling up. Also, the spinning mills, for the first time, had to cut back production ranging from 20 to 40 per cent from 24 May 2011 onwards to adjust the mismatch in the demand and supply position.

According to reports, around 1000 dyeing units located in Tamil Nadu had to close shops due to lack of demand in the potential market.

Dinakaran also mentioned that the improvement is visible in both domestic and international markets.

In Salem and Tirupur markets, the yarn prices have increased by Rs.5/- per kg during the current month. Infact, the price of 40s combed warp yarn has increased from Rs.185 per kg to Rs.190 kg, 30s combed hosiery yarn has increased from Rs.179 per kg to Rs.184 per kg and in respect of 40s combed hosiery yarn the price has increased from Rs.190 per kg to Rs.197 per kg, he added.

Dinakaran has pointed out that Mumbai market scenario is showing the signs of encouragement where the yarn prices have increased from Rs.10 per kg to Rs.20 per kg depending upon the counts when compared to the price prevailed on 1st September.

However, 64s combed warp yarn price has increased from Rs.205 per kg to Rs.225 per kg. The 40s combed warp yarn has increased from Rs.170 per kg to Rs.190 per kg and 92s combed warp yarn price has increased to Rs.260 per kg from Rs.240 per kg, he also said.

He stated that considerable improvement is seen in the Far East and Europe yarn markets. There 40s combed hosiery yarn has increased from USD 3.90 to USD 4.25 per kg in Far East markets within 20 days. In European market, 50s combed hosiery yarn price has risen to USD 5.15 from 4.75 USD.

"In respect of fine and superfine counts, the mills were incurring loss to the tune of Rs.38 to Rs.40 per kg of yarn and the same has come down considerably ranging between Rs.18 and Rs.25. The situation is likely to ease further as the festival season started." he said.

He said that the spinning mills which were hitherto offering cash discount and bulk discount for the purchase of yarn to the Tirupur market have now stopped and the prices of cotton yarn are likely to be increased by another Rs.5.00 per kg.

In fact, the cotton prices which were ruling at Rs.35,000/- per candy very recently has gone up to Rs.42,000/- per candy, he said.

"Despite some improvements in the yarn prices, spinning mills are not comfortable and therefore, there is no scope for any reduction in the yarn prices," he added at length.