The recent fall in natural and synthetic yarn prices has made the textiles mills uneasy, as it has led to cancellation of previous orders by fabric buyers.
Garment manufacturers and other fabric buyers who had placed orders when the prices of yarn were high are now turning their back or are demanding a cut in prices.
The situation of the textile mills which depend on exports is not much different and the unsold stock is piling up in the mills.
This has resulted in a severe financial crunch, especially for small and medium mills, which are finding the situation difficult to handle. Bigger mills are trying to cope with the situation by implementing new strategies to expand their business.
Industry analysts feel that the difficult situation has arisen because buyers are expecting a further fall in yarn prices. And traders, who usually stock for a fortnight to a month, are not stocking up any further and have sold their previous stocks as well. If the situation does not improve soon, textile mills will have to face a tough time ahead.
The prices of synthetic yarn have come down 20 percent in the last 45 days. For instance, the price of benchmark 80 Denier roto has fallen from Rs 131 per kg a month ago to Rs. 105 per kg. The demand for synthetic yarn, however, seems to be picking up.
Also, synthetic yarn prices are not likely to fall further even if demand slacks because most raw materials used to make these yarns are crude oil-based, the prices of which are not expected to fall further in the near future. Industry experts do not foresee a fall of more than Rs. 4 per kg in the price of synthetic yarn.
Hence, the problem is much with natural yarn rather than synthetic yarn, and immediate steps need to be urgently taken to help the small and medium sized textile mills.
Indian textile manufacturers had gone wrong in their estimate that overseas demand would increase in the aftermath of the March 11 earthquake and tsunami in Japan. They had anticipated that it would be difficult for China to meet the global demand in yarns as it is dependent on Japan for Purified Terephthalic Acid (PTA), a raw material for producing polyester fabric.
Fibre2fashion News Desk - India
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