Indian Cotton Yarn Export Revival Likely As Chinese Cotton Auction Begins At 25% Premium

Market News

Indian Cotton Yarn Export Revival Likely As Chinese Cotton Auction Begins At 25% Premium

Indian exporters are hopeful of a revival in cotton yarn exports after Chinese cotton auction started at a 25% premium over the prevailing fibre rate in India, according to market sources.

Despite robust demand from Bangladesh, overall cotton yarn exports remained under pressure during the current financial year due to sluggish demand from China. For April–December 2016, India’s cotton yarn exports slumped by 12% to 872.19 million kg from 987.21 million kg in the corresponding period last year.

Cotton yarn exports from India rose by a marginal 4.29% at 1307.11 million kg for the financial year 2015-16 from 1253.33 million kg for the previous year.

The first day of Chinese auction quoted cotton prices between Rs 51,000 and Rs 56,000 a candy (356 kg) as against Rs 42,000 a candy prevailing currently in most local markets in India – which means that Chinese cotton is costlier by a wide margin.

Cotton being auctioned in China is as much as seven year old. The quality of natural cotton begins deteriorating after a two to three years as the fibre starts growing yellow.

Yet, Chinese spinning mills are buying cotton, perhaps for blending it with fresh cotton. However, due to high prices, India tends to gain, despite the 3.5% duty levied by China on cotton imported from India.

India faces direct competition from Vietnam since China allows zero duty import from there. So, instead of cotton, Chinese textiles mills would move to purchase cotton yarn from India.

The Cotton Textiles Export Promotion Council (Texprocil) Executive Director Siddhartha Rajagopal has stated that Indian cotton yarn exports are expected to turn positive this year after a steep decline last year.

According to Loyal Textile Mills Ltd Chairman & Managing Director Manikam Ramaswami, yarn demand from overseas buyers was sluggish since the October price hike in cotton since importers held back their orders anticipating a price fall.

However, now they believe that cotton prices are not going to come down and have started placing orders for cotton and cotton yarn, due to which overall demand has seen a revival during the last few weeks, the Chennai–based textiles manufacturer said.