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Crude oil volatility affects Indian synthetics sector

Volatility in crude oil prices has hit Indian synthetic textile manufacturers. When crude prices hit their highest levels in 2018, raw material buyers placed massive orders steadily to build their pipeline inventory before any further rise. The sudden spurt in prices prompted producers of manmade fiber and synthetic yarn manufacturers to start placing orders again. However, the entire sentiment saw a reversal in two months.

Raw material buyers in the synthetic textile industry have disappeared from the market amid expectations of a further fall in prices. Raw material purchasers have deferred their purchase orders on expectations of a further decline in crude oil prices and, subsequently, prices of synthetic fiber and yarn. Manmade fibers and yarns are made from petrochemicals, which are derivatives of crude oil. Their prices follow the movement in crude oil prices.

The industry believes the October-December quarter may not be good in terms of the top line and bottom line but hopes for stabiliity from the March quarter. Also the impact of volatility in crude oil prices has been nullified by the rising demand for synthetic textile products in India. Polyester is slowly replacing cotton, thereby increasing the production of manmade fibers. Demand for synthetic textiles is rising with rapid urbanisation and low-cost options available in the clothing segment.