Representative image | Source: Unsplash
Yarn prices, mainly those of cotton yarn, have increased sharply in the last few weeks as inventories dried up and supplies have failed to match demand and spinning mills delayed resumption of their operations across the country.
“For example, yarn of 30s count quoted at Rs 175 a kg during the peak of novel Coronavirus pandemic but now quoting around Rs 250,” said Anand Poppat, a Rajkot-based trader of raw cotton, yarn, and spinning waste.
“Yarn prices have gone up by 10 to 20 percent since spinning mills delayed resumption of operations after being closed for a long time. This led to a mismatch of demand and supply,” said Dr K Selvaraju, Southern India Mill Association (SIMA) Secretary-General.
SIMA is the apex body of textile mills in south India and accounts for nearly 70 percent of India’s total spindle capacity of 46 million.
Poppat said there was a sudden rise in demand for yarn from the garment and cloth sectors resulting in the non-availability of stocks. “Initially, prices rose to Rs 220-230 and then periodically by Rs 2 to Rs 5 a kg to current levels,” he said.
Selvaraju said that the supply-demand mismatch cropped up as garment and fabric manufacturers resumed production operations quicker than the spinning sector.
“So, all the yarn inventory with the spinning mills dried up. The other reason why yarn prices have increased is that prices of raw materials such as cotton and man-made fibres have also shot up,” he said, agreeing that yarn prices had also dropped during the peak-COVID period.
According to the SIMA Secretary-General, cotton prices have increased by 30 percent and viscose prices by 25-30 percent.
Raw cotton (kapas) prices had dropped from levels of around Rs 4,500 a quintal to Rs 3,750 last year between March first week and April last week after the Union Government imposed a lockdown to contain the spread of novel Coronavirus (COVID-19).
Though the lockdown was eased since May, most of the industrial units began functioning only in September.
Currently, raw cotton prices are quoted between Rs 5,250 and Rs 5,700 a quintal in Rajkot markets in Gujarat, the largest producer in India, against the minimum support price of Rs 5,515.
In terms of ginned or processed cotton, which spinning mills use, prices are currently ruling at Rs 42,800 to Rs 43,200 for a candy (356 kg), up from around Rs 32,000 during the peak-COVID period.
Globally, too, cotton (ginned) prices have recovered more than 50 percent since they slumped to 49 US cents a pound (Rs 28,325 a candy) in March-April. Cotton prices in New York ruled at 80.36 cents a pound (Rs 46,450 a candy) at closing on January 5.
Tiruppur Exporters Association Executive Secretary S Sakthivel said the problem faced by garment producers in Tiruppur, which exports garments worth over Rs 25,000 crore annually, was that of yarn availability.
“Though yarn prices have increased by Rs 30-35 a kg, we are facing problems of supply. Mills are insisting on a cash payment which is adding to our inventory costs,” he said.
Garment makers in Tiruppur have urged the spinning mills and the Ministry of Textiles to ensure that there was no problem in supplying yarn.
SIMA’s Selvaraju said that the supply shortage problem was due to panic buying by fabric and garment manufacturers. “There is no problem with day-to-day supply. We have ample cotton supplies to meet demand,” he said.
All the stakeholders in the industry held a meeting on December 25 and they resolved to work with “perfect understanding”. “We told the stakeholders to avoid panic buying,” the SIMA official said.
Spinning mills are working only at 80-85 percent of their capacity since they are facing a shortage of workers. “It will take time for the industry to utilise full capacity. Migrant workers have not returned yet. Even public sector units such as National Textile Corporation mills have not resumed operations,” Selvaraju said.
Attributing the shortage and consequent price rise to inventory building, the SIMA Secretary-General said that the situation would be under control in a month’s time.
“This problem will exist only for a month. Once the mills start running fully, all these issues will be solved,” he said, adding that ample supplies of cotton will help them tide over the current situation.
India’s had a record 107.50 lakh bales (of 170 kg) carryover stocks from last season (October 2019-September 2020). This season, too, the industry could be left with at least 96.5 lakh bales carryover stocks.
This is on the back of cotton production being estimated at 356 lakh bales this season against 360 lakh bales last season. Exports are projected to be 54-60 lakh bales against 50 lakh bales last season and they are expected to provide some relief.