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Talking Point | July 2014

No drop in yarn export likely

Manikam Ramasamy, Texprocil Chairman, CMD of Loyal textiles

India exported 1,082 million kgs of cotton yarn, valued at $3.75 billion in the first 10 months (April-January) of fiscal year 2013-14. It is estimated that cotton yarn export for the full fiscal year 2013-14 would be around 1,350 million kgs valued at $4.70 billion. There is an increasing anxiety in the industry due to recent developments in Chinese cotton policy since China is the major importer of cotton and cotton yarn from India. The following graphs shows the monthly movement of yarn exports from India for the last three fiscal years:

It can be seen that the exports in the month of April dropped during the last three years. It is happening this year too. One of the reasons in addition to the high year end exports which cause a drop in April, is the temporary high cotton prices during this period. Last year as well as this year during the month of March and April Indian cotton prices have gone above the international prices for cotton used upto 40s count. Current Indian prices are higher than international prices and good quantity imports of 1 1/8 inch cotton is taking place.

The following graph indicates clearly that the price difference between Indian and Chinese cotton yarn prices is high. That is, prices of Indian cotton yarns after payment of duty and taxes in China is still very much lower than the Chinese domestic yarn prices. Given the better quality produced by Indian mills there will always be good exports of Indian yarns taking place, even if the difference between Chinese cotton prices and international cotton prices narrows down substantially. Indian mills need not fear a drop in yarn exports happening beyond the seasonal fluctuations. However profitability of exports will depend upon our price parity with International cotton prices.

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