Prices of textile products recovered broadly in June 2020 from the lows of April and May on account of gradual resumption of operations, India Ratings and Research said on Wednesday.
Textile prices recovered in June, no sustainable recovery yet: India Ratings and Research
According to Ind-Ra, several textile companies have increased utilisation of their respective capacities after the easing of lockdown restrictions since May 2020.
“The inventory pile-up, lower channel liquidity, and labour migration in the context of subdued demand will continue to impact textile operations and exports in 2FY21,” the ratings agency said in a credit report on the textile sector. Furthermore, the pick-up in the domestic demand in June could only be a flash in the pan after the unlock and hence there is a need to watch its sustainability.
Ind-Ra believes there could be opportunities emanating from global retailers looking to diversify away from China. The segments to benefit are garments and home textiles.
On the sub-segments of the textile industry, the ratings agency pointed out that international cotton prices (US) continued to recover in June, after dipping in April.
Fibre prices are steady, but yarn prices are weak, which will continue to pressure the margins of industry participants. Polyester staple fabric to cotton spread is the lowest since 2016; thus, the switching rates are likely to slow down a bit in the near term.
“Drawn texturised yarn price needs a special mention, which increased in June 2020. However, on a YTD basis, the price for imported purified terephthalic acid and mono-ethylene glycol fell,” the statement said.