Feedback Here

fbook  tweeter  linkin YouTube
Global contents also translated in Chinese

Chinese auction affects Indian spinners

The recent auction initiated by China on reserve cotton to fuel domestic mill demand is set to impact India’s spun yarn production.

The offtake by Chinese mills under the ongoing reserve cotton auctions in China has affected India’s cotton and cotton yarn exports.

In FY 2016, India’s spun yarn production grew at the slowest pace of about 3.2 per cent in the last four years. This slow pace of growth in spun yarn production has been driven by factors like tepid domestic consumption and limited growth in exports.

The Chinese move of cotton reserve auction could also impact margins of Indian spinning mills going ahead.

Given the concerns on yarn export prospects due to the expected improvement in mill use in China, and expectations of firm domestic cotton prices in the near term, under tightened cotton availability, the contribution margins of Indian spinning mills can come under further pressure in the coming quarters.

Despite the sluggish domestic demand, the weakness in the Indian currency during the fourth quarter of 2016 and the resulting improvement in export realisations in rupee terms drove up domestic yarn prices.

The increase in yarn prices was also driven by the impact of firm cotton prices in the backdrop of tightened cotton availability. As the increase in yarn prices was higher than the increase in cotton prices, the average contribution margin in the fourth quarter of 2016 was higher by five per cent on a quarter-on-quarter basis, though lower by roughly one per cent on a year-on-year basis.

 
LATEST TOP NEWS
 


 
MOST POPULAR NEWS
VF Logo