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Low cotton demand to impact spinners

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As per ICRA Limited, an Indian independent and professional investment information and credit rating agency, cotton yarn export quantity has been recorded at 23 per cent lower year on year during first seven months of financial year 2017. Due to the improved domestic mill consumption, China has also reduced 20 per cent of its imports which has adversely impacted yarn exports, falling 54 per cent year on year during the review period.

Jayanta Roy, Senior Vice President and Group Head, ICRA reportedly said that the fall in export demand for cotton yarn is a major challenge for spinners as the industry has been exporting a third of yarn produced for the last four years.

With consistent fall in demand, spinners have to cut down on capacity utilization, and apart from lower profits, the high cotton prices have translated into higher working capital requirements, leading to higher borrowings and weaker credit matrix.

Also ReadCotton prices worry Indian spinners

Though cotton prices have fallen since the beginning of the harvest season, it is still 17 per cent higher compared to the corresponding period last year. Moreover, cotton arrivals have constantly gone down since the demonetisation of high-value currency in the country on 8th November last year.

 

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