Cotton yarn prices are up by Rs 10. Gujarat-based mills increased it on a daily basis over a period of 15 days. Tamil Nadu-based mills did it in one shot on the 1st of September. Majority of the mills in Tamil Nadu had stopped offering prices towards the end of August in anticipation of the increase. The engine for this increase is cotton prices. Up by almost Rs 4,000 per candy, the shortage of good quality cotton has made sure prices sustain at higher levels. However, we do see prices hitting a plateau now. With new kapas arrivals delayed due to continuous rainfall across India, cotton prices might be under upward pressure for the rest of September. In October, we will most likely see some consolidation and easing once J34 starts arriving.
Pandya or Pujara?
There is something about the ancient system, being used in Tamil Nadu, of announcing a standard price for the entire month keeping the cotton prices in mind. It allows a fabric manufacturer to plan their purchase and focus on selling fabrics. There is assurance that their costing will not go haywire since raw material prices will stay the same for the entire month. When prices are changed daily, it becomes a struggle for weavers/knitters to keep-up and timing the market correctly itself becomes a challenge. The modern-day weaver spends less time marketing their products and more just keeping a track of yarn prices. Well, India remains a diverse country and bringing the entire country to follow the same policy, with so many variables like proximity to the source, cotton qualities, payment terms, etc, is next to impossible.
Staycation and Holistays
The Indian government has removed all restrictions on movement across the country. Restaurants and bars are beginning to open up. People are now venturing out to Goa and other nearby holiday destinations. Staycation being the next buzz word. There is a large pent-up demand for entertainment and tourism and hopefully, this demand will translate into activity on retail clothing counters as well. For apparel and garments, there is only way forward and that is up. The fear of Covid-19 is legitimate. But if everything is allowed, there is a large amount of people who would not care much and consume. Only if consumption rises, will prices sustain. There’s good demand for apparel from overseas. In fact, we’ve even seen some demand coming in from Latin America too, which is currently a hotbed of Covid-19.
The green shoots discussed in the last article have only grown bigger:
1) Viscose yarn is still on a roller coaster. A lot of factories in China are not offering for India at the moment. A lot of Indian importers are also being circumspect about buying from China. Even imported yarn prices have risen due to a spurt in demand and an increase in ocean freight. Domestic prices keep hovering between Rs 150 and Rs 160. Staying bullish on viscose for now.
2) September and October will be strong for sheeting fabrics. Ask any mill for ready delivery of 80s/100s and be ready to hear an insane price. November might see some easing in this segment but till then, it’s going to be a mad rush.
3) Polyester and filament yarn prices have surged too. Demand for cheaper and massy material shall continue to rise.
- In Gujarat, 30s combed knitting yarn is up from Rs 176 ex-factory to Rs 186 ex-factory now. Although export realisation has improved, the domestic market will probably be the biggest support for these prices. Its best for everyone if these prices sustain.
- 60s compact weaving yarn is now trending at Rs 265 ex-mill, an increase of Rs 10-12 over the last 15 days. This yarn count seems to be stable and might hold this position or settle at slightly lower. It’s a proportionate increase to the cotton price.
- 32s carded weaving yarns have also increased and hovering over 172-174 ex-factory.
- Open ends remain strong. 12s OE 1700 CSP is selling at Rs 120 ex-factory whereas 16s is at 126 ex-factory.
- 30s viscose yarn closed-out August at 158 ex-mill. Looking at the demand, there is little chance of this subsiding anytime soon.
Overseas price trends
Every major yarn importing nation is a buyer right now, subject to prices.
- 16s carded is quoted at $2.00 whereas 21s carded is at $2.10.
- 21s combed knitting from Gujarat is at $2.38.
- 30s cotton knitting yarn is being priced at $2.60 levels but the sweet spot for overseas buyers might be lower than this. They might have to wait for current deliveries to exhaust before they can get lower prices.
- Open end exports have dried up. There are buyers at better prices in the domestic market.
(Deepak Periwal is Founder & CEO, YarnLIVE)