After food, travel and other items, it is now the turn of apparels to get costlier. And this, just ahead of the festival season. As poor supplies and rising demand push up cotton prices, both in the global and domestic markets, leading textile exporters and apparel makers are gearing up to raise garment prices owing to rising raw material costs.
Between August and September, cotton prices in India have zoomed 36% to Rs 36,500 per candy (1 candy equals to 356 kg), a data from the Cotton Association of India shows. Globally too, cotton futures for the near-month delivery on the New York Mercantile Exchange hit a 15-year-high last week. Prices in the domestic futures market have also been north bound.
Arvind Mills, the country?s largest textile exporter, is looking to raise prices soon while Mafatlal Industries has already increased domestic prices by 10% and plans to hike it up for the overseas markets.
According to Susheel Kaul, CEO, Lifestyle Fabrics of Arvind Mills, ?The price situation is volatile. We are watching it very closely. There will definitely be some change in product prices as raw material prices have gone up.? Hinting that the company, well-known for jeans and other cotton clothing, could hike prices, he added, ?The pricerise will vary from product to product depending on the fabric used. It will be decided on the basis of rising input costs.?
Ranjan added besides inflation, the company?s wage costs have also increased by nearly 10% in the last 18 months. ?Apart from raw materials, rising price of other key factors like cost of utilities, manpower and supplies will all have an impact on product prices.?
Ajitesh Mullick, head-agri research, Religare Commodities, says the government?s decision on banning cotton export will decide the course of movement. ?Technically, it is looking upwards, though there might be some short-term correction,? he added.
Experts say Indian cotton prices have moved up despite expected bumper harvest in the 2010-2011 crop marketing year starting October 1. This has been because of good export demand as global supplies have dwindled on account of floods in cotton-growing regions of Pakistan and steadily declining inventories in other countries. Inventories monitored by ICE were down 96% this year as of Sep 23, adding momentum to the rally.
Rising consumption across the globe is also not helping matters. According to the US department of agriculture, global cotton consumption will rise to 120.5 million bales this year, outpacing production of 117 million bales. The consumption will be led by a surge in demand from China.