By Our Staff Reporter
MUMBAI, FEB. 10
The quantum of export of value added fabrics is currently low from India and if it needs to improve then firstly, the processing capacity needs to increase in India. Small units are unable to comply with strict pollution norms and it will help if the government can identify locations and provide plug & play units to start processing factories, according to Mr. Nikunj Bagadia, Chairman of Fabrics Subcommittee of Cotton Textiles Export Promotion Council (TEXPROCIL).
Manufacturing cost in decentralized units, Mr. Bagadia informed, is low and hence large companies outsource their requirements from the decentralized sector. Power cost is a substantial component in the operating costs and it is important to address this issue to encourage investment in large scale weaving units. India need to build scale in manufacturing processed fabrics as it is the final link in the value chain to manufacture garments & home textiles.
Setting up processing clusters takes long compared to countries like, say China where respective Provincial governments first set up basic factory sheds, common effluent plants etc. and then start inviting investments. Hence, in India quick approvals need to be given in order to start the processing units to encourage investments in this important link in the entire value chain, he pointed out.
Dwellling upon the recent trends in export of cotton fabrics, Mr. Bagadia said that the key features while analyzing the export performance data of cotton fabrics to top 10 destinations upto October 2020 show that the leading markets account for 65% of total export of cotton fabrics from India.
There was a 16% decline in total export of cotton fabrics from India for the period Jan-Oct 2020 over the previous year over the same period. The export of cotton fabrics to USA, South Korea, Sudan and Nigeria recorded positive growth with the reason for sharp growth in Nigeria being the fact that China is vacating space in printing low end fabrics and such orders are diverted to other markets, including India.
Dyed fabrics accounted for approximately 50% of cotton fabrics export from India and the rest are grey, printed and other finished fabrics. Even though export to some of the countries in the top ten markets has increased, there is a pressure on prices and profitability, he noted.
Mr. Bagadia said that the current pattern of yarn prices post lockdown in March and April, the Spinning Mills started to operate partially from end May resuming almost normal operations only after July.
However there was a shortage of labour due to labour migration. From October onwards, manufacturers and exporters of made-ups & apparel stared receiving huge orders and there was a sudden spurt in demand for cotton yarn. For the past couple of years spinning mills were under stress and were forced to hold 30 to 40 days stock. The accumulated stock was sold in October.
After October, spinners were unable to deliver quantity required by the weavers and knitters due to sudden spurt in demand for yarn. Hence, it takes 20 to 25 days waiting period for delivery. For the past two months, spinners are getting one and a half times more orders than their production capacity because downstream industry is trying to build up higher levels of stock and it is creating an artificial demand and thereby increase in prices, he revealed.
In the current situation, Mr. Bagadia said that the increasing demand for cotton yarn is being driven by domestic market and an increase in export orders for cotton yarn may further increase the yarn prices while the demand / supply situation will remain skewed. Demand for shirting fabrics has declined during the lockdown period across the world while the demand for home textiles is increasing.
Hopefully the demand for shirting fabrics will increase in the days to come and it is expected that at least 1 or 2% of China & Vietnam’s share will get diverted resulting in additional demand for yarn, particularly finer counts. Looking at increasing demand and prices, many small spinners who closed down during lockdown period have restarted their mills from October 2020 onwards.
Hence, availability of yarn in the market is increasing and there is no need for panic buying. The present situation is temporary and market forces will determine price volatility, he emphasised. With regard to cotton prices and organic cotton issues, Mr. Bagadia pointed out that there is a disproportionate increase in cotton and yarn prices. For example, 60s count price has gone up by 60% from August to January.
There is a decrease in availability of 30 mm and above variety of cotton during the current cotton year, mainly due to erratic rain fall in cotton growing areas. It is reported that quality of every variety of cotton has gone down with US Pima and Australia cotton doing good as far as long staple cotton is concerned. However, the impact of restrictions imposed by USA on cotton textile products made of Xinjiang cotton is also minimal and this issue is not the reason for increase in cotton and yarn prices in India.
Premium on organic cotton was very low over the past several years but there was a need for corrective action against fraudulent certifications. The present high premium is still justifiable and affordable by the retailers as there are genuine suppliers of organic cotton in India with sustained demand inspite of high premium, he concluded. (Source: Tecoya Trend)