Volatile, Uncertain, Complex, Confusing. No, Not Women.. Its Yarn

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On March 25th 2020, the famous textile rotation system in India came to a grinding halt.

Quit playing games with my heart
30s combed knitting yarn that was trending at Rs 196 ex-mill before the lockdown is currently at Rs 168 due to a slight recovery after touching the bottom at Rs 158. 60s compact has reduced from Rs 295 ex-mill to Rs 255. 30s viscose yarn has fallen from Rs 180 ex-mill to Rs 150. 30s polyester yarn has troughed from Rs 124 exmill to Rs 112.

Overseas, 16s carded is down from $2.22 to $1.88 whereas 21s carded is down from $2.35 to $1.95 FOB. 30 compact knitting is down from $2.70 to $2.25 with currency rates playing a major part too. On March 2nd, USD-INR stood at 72.5 whereas today it’s at 75.7. Owing to the reduction in the value of inventory coupled with the risk of defaults and delayed payments, the need of the hour is for all stakeholders to get united for faster decision-making and problem resolution.

I’m a survivor, I’m gonna make it
Major markets like Mumbai, Ahmedabad, Surat and Delhi are slowly crawling into action. There is no buying in these markets except a few corporate. Similar situation at Bhilwara and Ludhiana, where a severe liquidity crisis prevails. Majority of the mills in these regions have opted, and rightly so, for exports at highly competitive prices, since they come with an assurance of guaranteed payments. A complete absence of a domestic market is a huge contributing factor in the shift towards exports. Major buyers are China, South Korea, Bangladesh and Hong Kong.

Tirupur based exporters have bought approximately 6000-7000 bags of yarn over the last 10 days despite strict payment terms being dictated by the mills. This has taken even the Tirupur-based spinning mills by surprise. Ichalkaranji based looms have started buzzing again. This market has been majorly dominated by compressed prices from spinning mills with a new low seen every day. Apart from export orders of fabrics, some of the manufacturers are trying to cash in on the low yarn prices and job-work charges to stock up fabric for the future, hoping the fabric they make will sell at higher prices when the market picks up. Kolkata’s garment industry is shut with bare minimum cash flow, however, the innerwear and kids wear segments are doing pretty well.

I’m not afraid, to take a stand
Yarn orders placed before the lockdown are in limbo. Yarn prices have crashed by Rs 30-40 across markets and categories. Disputes & claims between spinner-dealer, dealer-consumer, manufacturer-wholesaler, exporter-importer are rampant. Everyone is fighting over discounts, cancellations, payments (principal & interest) & returns. Large yarn brands with holding capacity are holding their ground. They are pushing their dealers to lift their pre-lockdown orders at pre-lockdown prices. In turn, dealers are asking their clients to take delivery of yarn with the same terms. These are challenges that will take some time to even out. Nobody wishes to bear the entire loss alone. The faster everyone sheds their egos & resolves their internal issues, the quicker they shall reach normalcy.

I don’t go shopping
After being shuttered for 42 days in a 100% locked down India, retail fashion stores were allowed to see the light of day once the second lockdown ended. If a store doesn’t sell apparel, money doesn’t reach the starting point of the whole chain, i.e the yarn trader. In textiles, majority of the financing is done at the yarn stage. The money spent by a regular consumer in a branded store is what keeps the well-oiled machine called Rotation moving.

Visit any fashion store right now and ask the retailer what the biggest challenge they face right now is and he would tell you that consumers fear trying clothes out. To buy one t-shirt an average person would try at least four. The fear of the virus is preventing people from using trial rooms and trying out clothes that might have been tried out by others. Until this fear is driven out by innovative methods or eradication of the disease, we might have to contend with weak retail sales.

This fear is larger in India than in European or American markets. Hence, demand for fabrics and garments from overseas should march higher soon. During the absence of footfalls in retail stores, expect shoppers to flock to e-tailers like Myntra and Amazon for their immediate apparel needs.

I’m gonna take my horse to the old town road
The Shramik Special trains run by the Indian government has stuck a sword into the industry’s hopes of a fast revival. With spinning mills barely managing to run one shift with minimum labour, production and efficiency are grossly affected. Fabric manufacturers who have taken export orders are now seeing their labour slowly move out despite their best attempts at tempting them to stay back. The entire industrial belt of Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh and Telangana is impacted.

What doesn’t kill you makes you stronger
Currently, supply of yarn is larger than demand. Post Eid, it might turn the other way round. In today’s VUCA (volatility, uncertainty, complexity and ambiguity) environment, nothing is certain but even with a slight increase in demand, it is likely that yarn prices will move upwards. Bangladesh should be a major buyer in the market once their holiday ends. If Trump stops tweeting (unlikely), US-China can together lift global markets. After seeing the worst, the only way forward is up. As we tell all our clients who buy yarn through YarnLIVE: Sharp businessmen will convert this adversity into an opportunity and come out stronger and wealthier.

(Deepak Periwal is Founder & CEO, YarnLIVE)

1 COMMENT

  1. I wish the title was not offensive and probably then i would have read it. But clearly the narrow-minded ness of the writer is enough to put me off… shame that the magazine has kept it on their platform…

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