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High cotton prices pinch denim producers margins
Jun '10
The flare-up in raw cotton prices in recent months by nearly 25-30 percent has put pressure on margins of the cotton value-added chain, and the denim fabric manufacturing sector in particular, since it is not possible for them to pass on the increase in costs at one time.

The denim fabric is normally produced from short staple cotton fibre, which has an average length between 12-24 mm and the prices of the V-797 short staple cotton variety which is grown in Gujarat has shot up by 25 percent since last October.

Raw cotton accounts for around 50 percent of the input costs in denim fabric manufacturing and the surge in prices has resulted in production costs ascending by around 12-15 percent. Though the denim producers have hiked prices, it is completely not possible to pass on the complete burden to their buyers.

According to Dr PR Roy, who is known as 'Father of Denim' in India and is a reputed Textile Management Consultant and also Director of Fibre2Fashion, “Globally there would be a trend of higher cotton prices for the days to come, excepting perhaps at the beginning of the upcoming new season".

He added by saying, “Cotton prices may not come down appreciably in long run and accordingly textile players particularly the denim producers would have to look at somehow more economic cotton mixing for a given product and or increasing sales prices.”

He concluded with an advice to denim producers by saying, “Denim manufacturers should invest in product development and product innovation, which might help them to realize higher denim fabric prices and also try to increase sales volumes to reduce the impact."

Fibre2fashion News Desk - India

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