Spinning mills in Gujarat are currently finding themselves caught in the midst of a turbulent situation, grappling with rising costs and decreasing demand for their products both at home and abroad.
Despite a slight reduction in cotton prices, they still remain higher when compared to international counterparts. In terms of Indian currency, cotton futures hover between Rs 53,000 and Rs 54,000 per candy (356 kg).
This disparity in prices is not only affecting the competitiveness of local yarn producers but is also placing a squeezing hold on their financial stability.
Saurin Parikh, the president of the Spinners’ Association of Gujarat (SAG), shed some light on the matter, stating that the relatively higher cost of cotton in India, as compared to other countries, is increasing the overall expenses of yarn production. Consequently, Indian yarn manufacturers face reduced competitiveness in the international market.
Furthermore, the ongoing economic downturn in Europe and the US has resulted in a significant drop in apparel demand, as people are restraining their spending habits. Consequently, the demand for yarn has failed to rebound. In times of low demand, manufacturers are unable to raise prices due to market conditions.
Not only has the international market suffered, but even the domestic demand for yarn has recently taken a blow due to reduced discretionary spending, according to industry players. Sanjay Jain, chairman of the national textiles committee of the Indian Chamber of Commerce (ICC), expressed his concern over the situation, stating that the festive season did not bring the anticipated relief to spinning mills as demand remains sluggish.
Manufacturers are receiving fewer orders from finished fabric producers. The demand scenario is the worst it has been in the past two decades, with the industry facing a sustained slowdown. Changes in lifestyle and priorities of consumers are also contributing to the recent decline in discretionary spending.
The declining demand has not only affected the liquidity of yarn makers but has also resulted in a substantial reduction in cotton inventory in manufacturing units. Parikh revealed that the inventory days for cotton stock have been reduced from 60 days to just 12 days.
