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Will Indian denim makers gain from Chinese production cut?

13
Apr '12
The surging domestic demand is driving growth in India's denim market. Moreover, denim manufacturers in India may also be able to reposition in global market as Chinese companies are reducing their production, owing to increasing energy and labour costs.

“India's denim market is on the path of growth due to growing domestic demand. However, China's capacity reduction will help India reposition itself in the international market,” says Dr. PR Roy - Director - fibre2fashion and former group CEO of Arvind Ltd, the largest denim producer in India.

Making projection about growth in India's domestic denim production, he says, “India is in the process of adding 100 million metres of the denim fabric by 2013 compared to 2011.”

Analyzing the opportunity provided by China cutting down its fabric production, Mr. Aamir Akhtar, CEO, Denim (Fabrics), Arvind Limited, told fibre2fashion, “While individual companies like ourselves will continue to make their best efforts to get a share of global business, this opportunity needs to be leveraged at the country level. Countries like Bangladesh and Pakistan have duty free access to consuming markets like Europe and Canada. They have a highly depreciated currency and low cost labour."

"In addition, Bangladesh provides gas at subsidized prices to existing textile manufacturers. So, solutions need to be found at Government policy level to mitigate the disadvantages India has vis-à-vis its competitors like Bangladesh and Pakistan, and in order to make Indian denim industry more competitive and benefit from China's production cut,” he adds.

“China has denim capacity of 2.5 to 3 billion metres compared to India's current capacity of around 650 to 750 million metres. We will have to wait and watch how much production is being cut by China and which customers will come to India instead of China,” says Mr. Utsav Pandwar, Finance Controller, Aarvee Denims & Exports Limited.

Talking about India's competition in global denim market, Dr. Roy names China, Bangladesh, Pakistan, Indonesia, Hong Kong, some EU countries, Brazil and the US as other major denim producing countries.

However, Mr. Akhtar puts it differently, “We cannot single out one generic competitor. Global denim market is clearly segmented into premium denims, fashion denims/value for money denims and mass denims. In premium denims, India's competition is with Italy, Japan and a couple of Turkish mills; in fashion denims, our competition is with Turkey, Thailand, some Chinese mills and a couple of Pakistani mills; and in mass denims there is competition from majority of Chinese, Pakistani and Bangladeshi denim manufacturers.

While Mr. Pandwar foresees India's denim market to grow at around 15 percent per annum, Mr. Akhtar pegs the figure at around 10-12 percent per annum.

Fibre2fashion News Desk - India


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