The prices of textile products in India continued their upward momentum in December 2020 due to a healthy domestic demand and sustained export growth, according to the December 2020 edition of the credit news digest on India’s textile sector published by India Ratings and Research (Ind-Ra). Exports of raw cotton were higher by 2.5 times year on year (YoY) during August-November 2020.

Cotton prices increased marginally on a month-on-month (MoM) basis and remained higher on a YoY basis during December 2020, supported by a healthy export demand for cotton and yarn coupled with Cotton Corporation of India’s (CCI) procurement at minimum support prices (MSP) during the current cotton season.

The agency expects cotton prices to hold steady in the short run, despite the likelihood of a surplus production in the ongoing cotton season.

Cotton arrivals were higher during October-December 2020 by 44 per cent YoY, supported by higher procurement from CCI. CCI procured 52 per cent of the cotton arrivals during December 2020, setting a benchmark and string to support MSP for cotton.

Furthermore, private traders swayed away from taking huge positions due to a subdued domestic demand and rising cotton prices, Ind-Ra said in a press release.

Domestic cotton yarn production continued to grow by 1.3 per cent MoM and 4 per cent YoY, respectively in December 2020 on back of the higher export demand. Also, yarn prices continued their healthy growth in December 2020.

Exports increased by 10 per cent YoY in October 2020 and are likely to moderate during the fourth quarter of this fiscal with the closure of the winter season. However, there is an increasing cotton yarn demand from Asian countries that used to depend on supplies (cotton/yarn) from the Xinjiang region of China, and this is likely to benefit Indian spinners over any further de-linking by global players.

Man-made fibre (MMF) production increased by higher single digits on an YoY basis during October last year on back of a recovering demand. The price of polyester staple fibre (PSF) rose on a MoM basis, mimicking the healthy rise in crude oil prices during November-December 2020. While the segment recovered with delay in the third quarter of this fiscal, large players with a healthy balance sheet size have increased their exports, leading to a 4.4 per cent YoY rise in export volumes during the first seven months of this fiscal.

Production of cotton-knitted fabrics increased for the fifth month in a row in November, led by a surge in demand from the opening of retail stores and malls. Furthermore, demand for blended fabrics recovered in November 2020 and was 20% per cent YoY higher, led by the festive and marriage season demand.

Fabric players would remain weak for the second half of this fiscal due to social distancing and the fear of a second-wave of pandemic and emerging of a new coronavirus strain.

The apparel segment wholesale price index recovered to pre-COVID levels in November 2020, led by the festive and marriage season demand. Ind-Ra continues to expect apparel prices to remain benign in the second half of this fiscal, leading to inventory liquidation. The agency expects apparel and readymade garments exports to fall by 22-25 per cent YoY in this fiscal.

Home textiles players continued to witness a steady recovery over October-December 2020, led by consumers’ willingness to pay for health and wellness across the US and European Union territories, Ind-Ra added.