The global economic crisis is hurting India?s cotton yarn exports, although domestic consumption may rebound from September due to the festival season demand, senior industry executives said.
India, the world?s largest cotton yarn supplier, typically exports 20% to 25% of its domestic production annually. It will likely produce around 3,600 million kg of cotton yarn in the fiscal year through March 2012, according to the textile industry.
?Domestic demand is likely to recover from September as large orders start coming in for the festival season which begins from October. But exports may not pick up significantly as long as global financial uncertainties remain as some buyers will tend to wait for prices to fall further,? said DK Nair, the secretary general of the Confederation of Indian Textile Industry. But it?s too early to give a precise forecast of exports in the current fiscal, he added.
Global cotton yarn demand started falling since April, in sync with a general decline in commodity prices, as fears mounted that the recovery of the US and the EU economies from the 2008 financial meltdown remained more fragile than expected.
Domestic cotton yarn prices, too, have declined by around 40% for some popular varieties since then, tracking global trends. China, Korea, Hong Kong and Bangladesh are some India?s major markets for cotton yarn exports. The country is exporting around 65 million kg a month so far this fiscal, the same level as last year, despite huge stocks with domestic manufacturers, industry executives said.
Thousands of cotton spinning mills went on a strike in May and later cut output, demanding export incentives to ease huge stocks in an effort to regain their competitive edge against rivals such as China and Pakistan.
The mills were caught off-guard by a fall in local prices of yarn after they bought their main raw material, cotton, at high prices. They could not sell yarn locally at a profit, resulting in huge losses, the industry executives said.
The government has removed restrictions on cotton yarn exports in the current fiscal after capping the shipments at 720 million kg in 2010-11, as it expects local output to go up with a rise in cotton production. The country expects a second straight year of bumper cotton output in the next marketing year through September 2012 on higher planting and wide-spread rainfall, after producing 32.5 million bales in 2010-11.
Garment makers had been lobbying for a limit on yarn shipments at 600 million kg in the 2011-12 fiscal year to ensure adequate supplies.