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Textile firms in a bind over soaring cotton price

Textile firms in a bind over soaring cotton price
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First Published: Tue, Apr 13 2010. 03 52 PM IST
Updated: Tue, Apr 13 2010. 03 52 PM IST
Mumbai: Soaring exports of raw cotton and a sharply appreciating rupee may hit India’s textile exports in FY11, though the impact may be limited due to a recovery in global demand and competitive pricing, industry players said.
“A firm rupee and ever increasing raw material prices are a big concern...but we hope as long as the international demand and prices stay higher our exports will grow,” said D.K. Nair, secretary general at Confederation of Indian Textile Industry (CITI).
The Indian rupee has gained 4.6% against the US dollar so far in 2010. A stronger rupee reduces export realisations for apparel and textile exporters.
A surge in cotton exports is making domestic supplies scarce, pushing up prices of the commodity that is a key input for textile and apparel makers.
India’s 2009-10 cotton exports are likely to rise to 8 million bales, up 129% on year, driven by strong demand from China and Bangladesh, a senior government official said last week.
The country had exported 3.5 million bales in 2008/09 and the government initially estimated exports of 5.5 million bales for the year, but lower production in China, the major consumer, has helped exports.
“Exports to China has been very good .... about 3.08 million bales or about 56% of the exports so far,” said A.B. Joshi, chairman, Cotton Advisory Board (CAB), a body of government, cotton growers, industry associations, traders and ginners.
World 2009/10 cotton ending stocks will slump almost 20% year-on-year because of lower output in top consumer China and increased consumption in India and Turkey among others, influential industry analyst Cotlook said.
International cotton prices have increased by about 67% over the same period last year keeping Indian textile industry still competitive, but exports of end products to just recovering markets need to be attractively priced.
Textile and yarn makers are planning to increase prices of their products, after cotton prices rose steeply, to offset the pressure on margins.
“We will have to increase prices. We are trying to see how much market can absorb,” said R K Dalmia, senior president at diversified Century Textiles and Industries Ltd.
The industry is increasing prices to absorb the higher cotton price, he said.
“Depending upon the market conditions our marketing team keeps revising,” said Jayesh Shah, chief financial officer at Arvind Ltd.
“Even more than cotton prices what is worrisome is cotton yarn prices,” said Sunil Khandelwal, chief financial officer at Alok Industries, which is planning to raise prices of finished products by 10 to 15% in May.
Cotton yarn prices have gone up by almost 50% over the past 2-3 months due to shortage of power in many southern cotton mills, he said.
Analysts said the textile industry can only increase the prices by up to 20% in comparison with cotton prices, which are higher by up to 54% over the same period last year in almost all varieties.
“Those selling home textiles and garments to the domestic markets may be able to pass on the additional costs to the consumers,” said Shishir Jaipuria, chairman of CITI.
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First Published: Tue, Apr 13 2010. 03 52 PM IST