Rising demand from overseas as well as domestic market is helping cotton spinners in India make money and shed their earlier losses.
Cotton yarn exports from India grew by 75 percent month-on-month from 43.69 million kg in October 2011 to 76.36 million kg in November 2011, as per the data released by Directorate General of Foreign Trade.
In earlier part of 2011, price volatility and poor demand raised the cost of inventory. Spinners who procured cotton at very high rates were compelled to close down several mills partially or entirely.
However, prices have eased now and a weakening Indian currency has significantly pushed up the export demand. Although only three-fourth of the production capacity is being utilised at present, spinners are likely to enhance their production very soon.
According to the textile industry sources, garment exporters have started getting new orders which would eventually boost demand for cotton yarn, which in turn, would allow the mills to enhance their production capacity.
Demand for cotton yarn from Sri Lanka, China, Egypt, Vietnam and Bangladesh spurred in a great way during November 2011.
In addition to the fall in rupee value which helped the exporters, cotton yarn prices have also started easing over the past few months.
Domestically, the price of 30's combed, standard cotton yarn variety for exports reduced from Rs. 170 per kg in October 2011 to Rs. 158 per kg during November 2011, making it even more cheap for overseas buyers importing in dollar terms.
Presently, cotton yarn prices have again increased to Rs. 172 per kg, but new inquiries are still coming in, resultantly mills which were compelled to close down earlier may resume their operations over next 15 to 30 days, while the mills which cut their production are also likely to resume to their original production levels.
During early last year, spinners were compelled to sell cotton yarn at prices below production cost, in order to divest themselves of the high cost inventory that was lying with them.
Prices of standard Shankar 6 variety of cotton went up to a high of Rs. 55,000 per candy (1 candy = 356 kg) in early 2011, but later cotton prices experienced a sharp fall forcing spinners to sell their yarn at lower rates.
Fibre2fashion News Desk - India