US eyes synthetic fibre boost in India as China's grip weakens

Figure 1: Top 10 countries exporting synthetic fibres to India in CY 2024 (in $ mn)

Source: TexPro, F2F Analysis

The US currently ranks as the seventh-largest exporter to India. India's decision to diversify its sourcing of synthetic fibres comes at a time when the US is escalating trade tensions with multiple nations. India's heavy reliance on China for synthetic fibres raises concerns over potential dumping and price hikes, especially if Chinese exports face trade restrictions from the US. In response, India aims to achieve two strategic objectives—curbing the influx of low-cost Chinese synthetic fibres while mitigating the risk of dumping and strengthening trade ties with the US by increasing imports of its higher-quality synthetic fibres.

Table 1: Leading countries exporting synthetic fibres to India - applied tariff rates (%) and regulatory requirements

Source: TradeMap, F2F Analysis

*Please note that for certain 6-digit HS code products of Thailand, South Korea, Indonesia and Vietnam, the tariff rates are 5 per cent due to their exclusion from the ASEAN-India FTA and South Korea-India CEPA.

Currently, India imposes a most favoured nation (MFN) tariff of 5 per cent on both countries, with 4 regulatory requirements for China and 5 for the US. In the case of the US, the additional regulatory requirement is a mandatory testing procedure essential for synthetic fibres to be imported into India.

US’ exports of synthetic fibres to India

Figure 2: US’ monthly exports of synthetic fibres to India in CY 2023 and CY 2024

Source: TexPro, F2F Analysis

August and September stand out as particularly high export months for US synthetic fibres to India. In both 2023 and 2024, these months show significant peaks, with September 2024 especially notable due to a sharp rise in exports. This trend suggests that these months are critical for US exporters, likely driven by increased demand in India’s textile sector as they prepare for end-of-year production cycles. The heightened exports during August and September could reflect seasonal purchasing patterns, where Indian manufacturers source higher-quality synthetic fibres to meet upcoming demand.

Market share and price trends

The United States plays a significant role in the higher-end synthetic fibre market, particularly in products like Synthetic Monofilament (SM 67 Decitex), which commands a unit rate of $43.82/kg—considerably higher than that of other countries such as South Korea ($86.68/kg for SM 67 Decitex). The US consistently provides products at premium rates, which are often perceived to be of higher quality or specific technological standards. However, this premium pricing comes at a cost—cost competitiveness.

The issue of cost-competitiveness for the US

Higher Prices: While the US is known for producing high-quality synthetic fibre, the higher pricing structure makes it difficult to compete with China and Indonesia, where prices are significantly lower. This might limit the US' share of the Indian market, especially as price-sensitive buyers may prefer more affordable imports.

Market Limitation: The synthetic fibre market, especially in the (Synthetic Filament Yarn) SFY and (Synthetic Staple Fibres) SSF categories, is price-driven. Countries with lower unit rates have a clear advantage when it comes to expanding their market share, which might make it challenging for the US to significantly increase its share, despite the high quality of its products.

US vs South Korea - Will the increased exports from the US rattle China or South Korea?

South Korea poses a stronger challenge to the US in the synthetic fibre market due to its high-quality offerings at competitive prices. While the US excels in premium product segments, South Korea delivers similarly high-quality goods at more attractive unit rates, making it a direct competitor in key categories. An increase in US imports is unlikely to significantly impact China, which dominates the lower-cost segment, but it could directly affect South Korea, as both nations compete for the same high-value market share.

A key advantage for South Korea is its zero per cent tariff on synthetic fibre exports to India under their trade agreement, providing a substantial edge over the US in both pricing and market access. This tariff benefit remains a crucial factor, potentially limiting the US' ability to expand its share despite offering superior-quality products. However, if India seeks to strengthen trade relations with the US, it may consider revisiting its agreement with South Korea. In such a scenario, India could reassess preferential terms on select synthetic fibre products, potentially creating opportunities for the US to gain a stronger foothold in the market.

How do the ASEAN countries and Taiwan fare in the Indian Market?

South Korea happens to be a direct rival to the US, given its high-quality, premium-priced products, whereas other top exporting countries such as ASEAN’s Thailand, Vietnam and Taiwan compete with China’s cost-effective synthetic fibres. Despite the added advantage of having zero per cent tariff on several synthetic fibre categories, the three ASEAN countries have not been able to beat China in terms of cost-effectiveness. With China’s reduced influence in India, the three ASEAN countries, along with Taiwan, can look to increase their market share in the low-cost category. These countries would likely gain from the positive externalities that arise from India’s decision to shift its outsourcing from China to the US.

Quality Control Orders - Opportunity for American synthetic fibre manufacturers

India's Quality Control Orders (QCOs) on synthetic fibres could provide a significant advantage to American manufacturers, as these regulations focus on ensuring higher product standards that align with the quality benchmarks often met by US-made fibres. While China has long been a dominant supplier of low-cost synthetic fibres, the QCOs require that imported fibres meet strict quality certifications set by the Bureau of Indian Standards (BIS). Since American synthetic fibres typically fulfil these higher quality requirements, they are well-positioned to benefit from India's increasing demand for premium products. The move towards stricter quality control could reduce the influx of lower-quality Chinese fibres, creating an opportunity for US manufacturers to fill this gap with their higher-quality, more reliable products.

The shifting dynamics in India’s synthetic fibre imports present a significant opportunity for the US to expand its market share. With China’s dominance in the low-cost segment facing potential hurdles due to trade barriers, India’s push for higher quality standards aligns perfectly with the US’ premium offerings. However, challenges remain, particularly in terms of cost competitiveness, with countries like South Korea presenting stiff competition. Despite these challenges, the US can leverage India’s new quality control regulations to strengthen its position, especially as India reviews trade agreements to bolster ties with the US. The coming years could see a transformation in the market as both countries navigate these complex trade relationships.

Fibre2Fashion News Desk (NS)