Year 2015 didn’t prove to be fruitful for cotton spinning mills as the yarn prices continued to remain tricky, after collapsing 8-15 per cent from January 2014, across various grades. Apparently, mills in the south that spin almost half the yarns in the country were adversely affected by massive rains in Tamil Nadu over the last six weeks that hindered trade and logistics.
Similar scenes can be recorded on the export front too. Prerana Desai, VP (Research) at Edelweiss Agri-services and credit inferred that, weekly exports in the fourth week of November recovered from the lows recorded in the previous week at 15.4 million kg. But exports sunk back in December’s first week, as exports to the top four destinations—China, Bangladesh, Egypt and the US—were feeble.
Mills were loaded with huge inventory after spinning mills added capacity since 2012, and this overcapacity is a bigger problem. In addition, Chinese buyers have shifted to imports from Vietnam and Indonesia, deteriorating the demand for Indian yarn. Southern India Mills’ Association (SIMA) revealed that India’s trade in international markets has reduced by about 14 per cent while Vietnam’s and Indonesia’s trade has risen by 29 per cent and 10 per cent respectively.
Presently the only bright side that assists the pressure to stand low margins is the low cotton prices both internationally and in local markets. Meanwhile, stock prices of select integrated mills have run-up due to a steady improvement in the entire scope of cotton textiles. Moreover, without undermining the high inventory, certain units have cut down production which should certainly decrease surplus stock and carrying costs for mills. Any increase for yarn in global markets in the future is likely to be the game changer for pricing and profitable avenues.
