Home / Knowledge / News / Textiles / High cotton prices to slash spinners' profits
High cotton prices to slash spinners' profits
13
Jul '16
Soaring cotton prices could be bad news for the spinning sector of India's cotton industry. According to ratings agency Icra, the spurt in India's domestic cotton prices, which have now overtaken international rates, points to shortage and will adversely impact yarn demand and profitability of spinning companies in the second quarter of this fiscal.

Domestic prices of ginned cotton have increased significantly from Rs 90-92/kg in April 2016 to Rs 122/kg currently.

"The spurt in cotton prices is beyond expectations and points to a severe shortage of cotton in the domestic markets. Slower cotton sowing and decline in cotton sown area, apart from cotton stocking by intermediaries, could have led to this sharp rise in prices. However, the recent increase in cotton prices can motivate the farmers further and the cotton sowing area can improve in the coming months," Icra VP, Corporate Sector Ratings, Anil Gupta said.

According to its estimates, in the near term, profitability of spinning industry will be adversely impacted because of the price rise as it faces challenges of slow growth in domestic consumption and high reliance on exports.

With domestic cotton prices higher than international rates, export prospects for the spinning industry also pose a challenge.

"Both the above factors are a challenge for the mills to sell their production and one can see a decline in capacity utilisation and also contribution margins, to prevent inventory build-up," Gupta added.

The spinners, who may have stocked inventories for four to five months in March 2016, may witness improved profitability as they are likely to gain from higher yarn prices, he said.

However, many spinning companies had expected cotton prices to be stable in cotton year 2016, and the cotton inventory stocking was not beyond two months in March 2016.

Icra believes stability in cotton prices is most critical for a profitable textile industry as it minimises the risks of inventory losses and the need for a price hike for the existing and future orders. (SH)

Fibre2Fashion News Desk – India


Must ReadView All

Top 15 US fashion brands are collectively worth $70 bn

Fashion | On 22nd Jul 2018

Top 15 US fashion brands are collectively worth $70 bn

The top 15 American fashion brands are collectively worth close to...

Courtesy: Covestro

Textiles | On 22nd Jul 2018

Covestro's new products for waterproof textile coating

Covestro, which is among the largest polymer companies, has unveiled...

Evogene, IMAmt to work together in insect resistance

Textiles | On 22nd Jul 2018

Evogene, IMAmt to work together in insect resistance

Evogene, a leading biotechnology company developing novel products...

Interviews View All

Subhashini Srinivasan
The S Studio

Ethnicwear market will see an upward trend if uniqueness and quality are...

Vasanth Kumar
Max Fashion India

‘Traditional high-street retailers are now willing to offer franchisees to ...

Kaizad Hansotia
GetNatty

Competition is the best thing that can happen to a startup

Ravindra Jain, Ashish Baid

Oswal Prints Private Limited has been manufacturing and exporting ethnic...

John Kelley

Textile Events is one of the largest textile fair in the United Kingdom,...

Sandip Bhojani, Manthan Patel

Krypthm Tradelink LLP is a Surat-based manufacturer of westernwear....

Mohammad Hassan
Biax Fiberfilm

About one in every 20 patients picks up an infection while hospitalised....

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Larry L Kinn
Suominen Corporation

Larry L Kinn, Senior Vice President - Operations Americas of Suominen...

Madhu Jain
Madhu Jain

She grew up in the walled city of Old Delhi, completed her studies, and...

Priya Somaiya
Usha Social Services

The Usha Silai label from Usha International is all set for a retail...

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


July 2018

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Advanced Search