Yarn production in China is set to rise. This is likely to hit Indian mills, catering to the Chinese market. So far, Indian cotton yarn exports to China showed considerable growth. Mills in that country used to buy cotton at higher prices.
India’s yarn exports to China are expected to fall by about 20 per cent this year. Even if there is a demand for cotton yarn from China it might come at very thin margins, which many Indian companies might find unviable. China’s decision to raise spending on farm subsidies means cotton will be available to spinning mills at a cheaper rate. This will boost yarn production in that country. In anticipation of high demand from China, Indian mills ramped up capacities in the past three years. So, dwindling demand will hit their bottom lines.
Indian yYarn exporters are considering other destinations such as Vietnam, Cambodia and Latin America even though these volumes cannot match demand from the Chinese market. The irony is that this year India faces a record cotton crop of 40 million bales compared with 37 million bales in 2013-2014. For 2014-2015, cotton yarn exports are projected at 1,000 million kg, and this is expected to decline in 2015-2016 if demand from China falls.