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Rupee depreciation holds yarn prices; helps exports

27
Dec '11
The weakening of Indian rupee against the US dollar is helping to hold yarn prices and is contributing to yarn exports, according to industry analysts.

Speaking to fibre2fashion, Mr. Sunil Patwari, Managing Director of Nagreeka Exports, said, “There is a marginal impact due to rupee depreciation in the sense that it has helped us to hold yarn prices and has also helped us to be more competitive in the international market.”

Explaining the impact of currency depreciation on textile exports Mr. KK Agarwal, Sr. Vice President Northern India Textile Mills' Association (NITMA) and Chairman & MD Alps Industries Limited, says, “Indian currency is depreciating against the US dollar, while the Chinese yuan has appreciated by 3-4 percent and Pakistani rupee has also not weakened as much as the Indian rupee. This is proving to be beneficial for the country's textile industry, as its import component is hardly 10 percent. Currently, imports are negligent while 90 percent of export sales are in dollar terms.”

“Yarn and garment exporters may get an advantage due to rupee depreciation. So there will be improvements in exports, but the exporters will not be able to negotiate much with the prices since the demand is not that good,” opines SV Devarajan, President of the South India Spinners' Association (SISPA).

Mr. Agarwal is, however, optimistic about good performance of spinning mills and says, “This quarter and the next quarter should be good for the spinners compared to last two quarters. Now, we are in the positive EBITA of around 10-15 percent, depending on the area where we have our spinning mills. The EBITA was negative in the first 2 quarters.”

Reasoning further, he continues, “The yarn prices are not going down; on the contrary they will stay stronger and rupee is also weakening due to which Indian yarn exports are able to compete in the international market. Moreover, the demand is good today because of low production of yarn in India and internationally. Hence, spinning mills that had reduced their production by around 25 percent in the last six months will be gradually increasing their production. Most of the spinning mills are in the process of re-employing more workers and increasing their production. So, hopefully the next two quarters should be good.”

Sounding not very optimistic, Mr. Devarajan says, “The situation is still not very clear. The cotton prices are slightly lower now but many spinning mills are still incurring a loss of Rs. 10-15 per kg. The confidence level among yarn manufacturers, fabric manufacturers and garment manufacturers is very low. Also, demand from the mills is not very good as these are operating with minimum low stock as no one wants to increase their inventory.”

Similarly, Mr. Patwari opines, “At this point of time it looks difficult to say anything. Cotton prices, as per our expectations, should have been more than what it is now but they are holding quite well. Yarn prices have also found a flat. Margins are also not positive. For margins to be positive, cotton has to move more downwards than yarn. Then, we can look forward to better times.”

Fibre2fashion News Desk - India


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