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COVID-19 puts break on India's raw material import

Feb '20
Pic: Shutterstock
Pic: Shutterstock
Novel coronavirus (n-CoV or COVID-19) epidemic has taken more than 2,500 lives till now, and if the severity continues further the damage will be beyond repair as China is a major trading partner of several countries including India. China is a major importer of cotton yarn and exporter of purified terephthalic acid (PTA) and polyester staple fibre (PSF).

Trade between the India and China (including Hong Kong) was $115 billion in calendar year 2019, as per the latest Crisil report 'The n-CoV fallout'.

China is the 4th largest trading partner with India for PTA and the largest trading partner for PSF. India imports close to 72,000 tons of PTA and 43,000 tons of PSF from China (data as of 2018 from TexPro). Central China, the hub of feedstock manufacturing, is locked down at a time when the Indian government has abolished 2.5 per cent anti-dumping duty on PTA. The virtual closure due to n-CoV has put break on PTA import from China.

Another sector that will feel the impact is textile cotton yarn. India exports 27 per cent of total cotton yarn to China and the decrease in exports will put a pressure on the domestic cotton yarn prices, in turn creating lower margins for the producers.

The readymade garments sector, however, would not be affected much as China accounts for only 1 per cent of India's overall exports.

Due to rising operating costs, the sourcing of apparel by the US and EU had already shifted from China to other low-cost economies. "N-CoV will further impact China’s exports, thereby giving more opportunities to low-cost economies like India, Vietnam, and Bangladesh. There is an improvement in apparel orders from US and EU to India, and is likely to get incremental $2-3 billion of orders for fiscal 2021. Although, the operating rates of many Indian RMG players are high at ~90 per cent, the labour-intensive sector should be able to add temporary manpower to take up these additional orders," the Crisil report said.

Fibre2Fashion News Desk (WE-DD)

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