Textile mills seek to export more yarn to contain falling prices

With cotton yarn prices dropping to Rs 220 a kg from Rs 240 a few weeks ago, textile mills are looking to the Centre for some relief in the form of raised export cap.

“The Centre had fixed 720 million kg (mkg) as the limit for cotton yarn exports. The shipments had to be completed by January 15. But only 660 mkg have been exported,” said Mr D.K. Nair, Secretary-General of Confederation of Indian Textile Industry, the apex body for textile units in the country.

In a letter to the Textiles Ministry, the federation's chairman, Mr Shishir Jaipuria, has sought clearance to export the unutilised quota of 60 mkg and an additional 100 mkg.

“Cotton yarn prices have dropped due to lack of demand in the domestic market. If an additional quantity is allowed to be exported, it will help mills fetch better prices,” said Mr Nair.

The problem for textile mills is that cotton prices have surged over Rs 50,000 a candy (of 356 kg) in the domestic market on cues from the global market. Cotton prices have gained also due to fears of the crop being lower than 329 lakh bales (of 170 kg) estimated by the Cotton Advisory Board.

In South India, at the Salem and Tirupur market yards, prices of both finer and coarse count yarns are ruling steady. In the Salem tract (where ELS cotton is widely grown), price of 80s finer count rules at Rs 2,080 for 5-kg against Rs 1,950 last week while the price of coarse yarn counts (combed) such as 20s, 34s and 40s are ruling steady at Rs 19,550, Rs 23,522 and Rs 24,221 for 100-kg respectively (as available with Tirupur Exporters' Association).

Mills are in a quandary over yarn pricing at the upcoming monthly meeting on February 1 to fix yarn price under the guidance of Coimbatore-based Southern India Mills' Association (SIMA). “In tune with the escalating cotton prices, yarn prices should also go up. But we fear buyers' resistance will increase if yarn prices are raised at our meeting,” said Mr K Selvaraju, Secretary General of SIMA.

Asked whether they would face buyer resistance, Mr J. Thulasidharan, Chairman, SIMA, said, “We are in a position to pass on the price rise to our buyers and if we fail to do so, that will take a toll on the operating margins of textile companies. If the raw material price surge continues, spinners may either cut down production or may consider alternatives such as synthetic yarn.”An industry analyst predicts a dip in cotton and yarn prices from July due to drop in consumption after export obligations have been met.

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