Rumours of a further lockdown are the biggest threat to the textile industry right now. Plain and simple, it prevents people from buying. The government keeps publishing the daily rise in cases and deaths which only adds fuel to the fire. Although the government has come out saying that there will not be a further lockdown, the threat of the infection in major cities like Mumbai, Delhi, Ahmedabad & Chennai is definitely real. State governments are starting to take their own calls. This makes a lot of people feel there will be another lockdown in these cities at least.
Chennai has been locked down till the end of this month. Looms at Surat are shutting down once again. Added to this is the fact that Bhiwandi is under curfew this week. But, therein lies the opportunity too. Bangladesh is buying, China is buying, Europe is buying, South Korea is buying, Sri Lanka is buying, Tirupur is buying, Ichalkaranji is buying, Kolkata is buying, Ludhiana has started buying. It’s time to sell what they need. If prices are depressed, time to make something that will sell at higher. Whenever I feel pessimistic about the markets, I remind myself of this mantra: The markets are never bad, only the reach is limited.
From zero to anything is progress
A typical textile entrepreneur usually breathes, eats and sleeps textiles. The sentiment across the textile spectrum seems to lift even with a slight uptick in demand because for close to two months, everyone has only been watching webinars and mythology shows in their living rooms.
Hence, it doesn’t take much demand these days to book a standard-capacity spinning mill’s capacity. Demand and inquiries from overseas is very healthy. There is no desperation to sell which is preventing prices from entering a downward spiral. There is a spurt in yarn prices from a fortnight ago but this is not the market rising, it’s merely the market correcting itself. Prices had fallen to abnormal levels in some counts and an increase in prices is only a sign of prices gaining sanity once again.
- 30s combed cotton knitting yarn is up from Rs 158 to Rs 172 ex-factory.
- 60s compact is still at Rs 255 ex-factory and trending downwards. Some spinning mills increased the prices for a few days but found no support at the new level.
- Open ends have hit all-time lows with 10s and 20s with 1700 CSP selling at Rs 96 and Rs 116 ex-factory respectively.
- 30s PC Combed with a 48:52 blend is selling at Rs 150 ex-mill. Demand for PC/CVC yarns is fluctuating and has seen some see-sawing in prices.
- 30s viscose yarn is status quo at Rs 150 and trending downwards. Imported viscose yarns are even cheaper but not a lot of importers are willing to sell at these levels as it would mean a loss of Rs 20-30 per kg. Plenty of containers are lying unsold at warehouses and some still stuck at ports with demurrage piling on.
- 30s polyester yarn is trudging along at Rs 112 since fibre prices remained unchanged this fortnight.
- Overseas, buyers still want the month-old prices from India. The highly depressed prices last month have spoiled the buyers like candies spoil kids and they want more at the same cost. Bangladesh & China are primary buyers today with volumes expected to grow over the rest of June and July.
- 16s carded cotton yarn is selling at US$1.86 whereas 21s carded cotton yarn is at US$1.96 FOB.
- 30s compact cotton knitting yarn has adjusted from US$ 2.25 to US $2.35 with some mill or the other agreeing for lower. It’s a buyer’s market right now and with US$ 10- US$ 12 ready suitors for every buyer, they keep looking for who bends most. And someone always does.
- 40s cotton compact weaving yarn is selling at US$ 2.65 FOB. However, not many mills are able to offer this price and choose to wait for the domestic woven market to take off.
Retail right now is like cricket without spectators
Just the way spinners and yarn buyers are engaged in a war regarding old orders; retail brands are engaged in a bitter war against mall owners. Mall owners have waived off 50% of their rents but brands like Levi’s, Bata, Tommy Hilfiger, Calvin Klein and Madura Garments demand a full waiver.
There is a clamour for redesigning the rental agreements all together. The shops that have opened despite the dispute are in despair about footfalls. But as they say, the first step is always the most difficult one. People will shop and return to malls. If not now, then soon enough. However, without consumption at the end of the chain, the entire raw material chain shall have to wait. It might be an arduous wait.
Labour is slowly trickling back into factories. Sensing a return in demand, factory owners are leaving no stone unturned in getting their precious labour back. But this exercise comes with its own challenges. Like it happened at a mill in Tamil Nadu, one of the returning labour was tested positive for the coronavirus and the entire unit had to shut down temporarily. Many of them realise this challenge and are balancing excitement with caution. At a time when industries are hoping for labour to come back, a rising Covid-19 tally is not helping them feel safe about returning. In fact, it’s making some of the retained labour feel jittery and itching to take the train back to their hometown.
Drive slow, dangerous curves ahead
Yarns are likely to stay volatile in the near future. Traders have an option to hit the pause button but the manufacturers don’t.
They have several meters running even if they shutdown. The last 2-3 years have been a buyer’s market. Suppliers are now wary of sudden spurts and sharp falls. There is talk of anti-dumping duties on viscose and polyester yarns. There is likelihood of a record year-ending closing stock in cotton. The payment flow is still stunted. Important markets like Surat struggle with internal disputes between weavers, traders and processors. Everyone wants to secure their money by dictating their own terms.
There will be opportunities to grab and one has to be focused everyday to spot them. As they say on highways: Nazar hati, durghatna ghati.
(Deepak Periwal is Founder & CEO, YarnLIVE)