The Hindu Business Line : Cotton fabric output drops to 4-1/2 year low

Chennai, Dec. 6 Fabric production by mills has dropped to the lowest level in four and a half years on account of lower downstream production, owing to reduced demand from the US and European markets.

The demand for retail garments and textile products has declined in the US, affecting Indian fabric manufacturers, who are now cutting down production. As a result, yarn production is also falling and affecting the yarn producers’ business. Nearly 50 per cent of the total textile production is exported to the US and Europe.

“In tune with weaker clothing manufacturing, Indian cotton fabric output shrank at the steepest rate in several years in September, with volume dropping to the lowest level in two years. Across the industry, cotton fabric output dropped 10.1 per cent to less than 2.1 billion sq m. November marks the third straight monthly contraction, the biggest fall in four and a half years, and the smallest volume since October 2006,” said a report by Globecot, a global textile consulting body.

The declines were centered in the powerloom, handloom, and hosiery sectors – down a combined 11.4 per cent from a year ago.

Increase in cotton prices is a factor being blamed for putting pressure on yarn manufacturers. Over the last one year, yarn producers have been hit by the increase in cotton prices. This year, the Government has increased the minimum support price of raw cotton (MSP) 47 per cent.

Cotton harvest starts in September and ends in November. According to industry sources, yarn producers usually keep a stock for six months. However, this time, due to rise in MSP, the stocks have been stored for a month or two only.

In response to dramatically lower cotton fabric production, spinning mills begain curtailing yarn output at an alarming rate from September, increasing the likelihood of cotton use witnessing the steepest decline in over a decade during 2008-09.

Data available indicate that cotton yarn production in September dropped 8.5 per cent from September 2007 – a five-year low – to 227 million kg. While year-to-date output still shows a modest one per cent increase from the first nine months of last year.

“And with downstream demand unlikely to see a sustained rebound soon, cotton yarn production could slide further in coming months, pulling full-year volume lower from last year,” the Globecot report predicted.

Related Stories:
Global mill use of cotton set to slide
‘Hike in cotton support price will sink textile sector’
Rising cotton prices impact textile sector this year : SIMA

More Stories on : Economy | Textiles | Cotton

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