Spinners are confronted with rising uncertainties in India and China where foreign competitors in Pakistan and Vietnam are favored by the currency variations. The rise of the cotton fiber prices on domestic and international markets has eroded margins in both countries.
Cotton fiber prices have continued rising in the last seven days in India, although at a lower pace than observed in the previous weeks.
The rise of cotton yarn prices has also been weaker than earlier observed, as a clear sign that Indian spinners are experiencing a sharp fall of their margins.
Indian authorities have obviously supported cotton prices ahead of general elections, however to the detriment of the yarn industry also confronted with negative consequences on export markets of the recent rise of the rupee.
Cotton fiber and yarn exporters are no more able to really compete, whatever the relatively high share of the global markets they had until now conquered.
Indian spinners are increasingly confronted with rising competition from Vietnam where the level of Chinese investment is further soaring this year.
Vietnam’s apparel industry will further surge in the coming years and domestic spinners will take advantage of EU’s rules of origin imposed to their country in exchange for a duty-free access.
In China, spinners are also confronted with foreign yarns from Vietnam, which are actually partly produced by Chinese companies.
Although cotton yarn import prices have been raised in dollar terms, they have been lowered in yuan terms, benefiting from the fall of the VAT from 16% down to 13%.
In Pakistan by contrast, the decline of the rupee in the past 12 months is further boosting foreign demand for yarns, but also for apparel and home textiles, therefore supporting production and prices.
Pakistan is however suffering from a cotton deficit, meaning that spinners must buy foreign cotton at increasingly higher prices in local currency terms.
Source: Emergingtexties
