India's cotton cost pressure is expected to alleviate, spinning mills are difficult to improve

According to a recent analysis by a foreign industry organization, the general operating rate of Indian textile mills and weak cotton prices have caused cotton yarn prices to stagnate, and there is not much hope for cotton yarn sales in the future. In the first half of India’s 2017 fiscal year, the rise in cotton prices put tremendous pressure on Indian textile mills, but in the past two months, the good monsoon rains in India, the expansion of cotton planting area and the expected high yield of new cotton are expected to improve the financial situation of textile mills improve.　　 From April to November 2016, the spot price of S-6 in India soared from 90 rupees/kg to 140 rupees/kg. The domestic cotton production cut and tight inventory stimulated cotton prices to soar. At the same time, the decline in China's cotton inventory has also provided support for cotton prices. In the past six months, rising cotton prices have put a lot of pressure on Indian textile mills.　　According to a recent survey by the rating agency ICRA, the profitability of spinning mills has been squeezed again. The main problem is the stagnant growth of sales revenue and the increase in raw material costs. In the last two quarters, the average profit margin of Indian textile mills dropped from 15.4% in September 2016 to 12.8% in December, and further dropped to 11% in March 2017.　　 The fall in cotton prices in India in the past two months has brought hope to textile mills, but can it be sustained? Industry experts predict that India's cotton planting area will increase by 10% in 2017/18, and the harvest prospects in the United States and Australia are promising, so international cotton prices are unlikely to rise. Indian cotton prices are closely related to international cotton prices, so Indian cotton prices are expected to remain weak in the coming months.　　The key to the problem is that the demand for cotton yarn is difficult to increase. India's cotton yarn production fell to the lowest in five years in fiscal 2017. The main reason for the weak demand from textile mills in 2016 was the sharp decline in cotton yarn exports (decreased demand in China), which accounted for one-third of India's total cotton yarn consumption. Although India's cotton yarn exports have recovered in recent months, it is not enough to offset the sharp decline in the previous period.　　 With the approach of Indian festival sales, the elimination of the impact of the waste policy and the transition of the new GST tax system, Indian spinning mills expect the purchase of domestic cloth mills to increase. At the same time, due to the general operating rate of domestic textile mills and weak cotton prices, cotton yarn prices may stagnate. Therefore, there is still not much hope for cotton yarn sales in the future, and the profits of yarn mills are unlikely to improve significantly. In addition, although the 5% GST tax is a good thing for the cotton textile industry, most textile mills in India are small and medium-sized enterprises. Therefore, the short-term supply problems caused by the new GST tax system and increased costs may continue for some time. . The real operating conditions of textile mills may not be revealed until at least the second half of the 2018 fiscal year. Article Keywords: 　Cotton India Cotton Yarn