The living environment of Indian yarn mills continues to deteriorate

According to the report of the Indian analysis agency, although the ultra-low domestic cotton price in India has brought benefits to the production of spinning mills, the blockade and shutdown of production caused by the epidemic will severely set back downstream consumer demand in the next six months.　　 The report stated that while the new crown epidemic will affect the liquidity of most companies in the spinning industry, it will also cause the revenue and profit margins of spinning mills to decline. Small companies with high debts, financing difficulties, and lack of liquidity have been hit the hardest.　　In recent years, Indian cotton yarn manufacturers have faced a series of difficulties, including declining exports and domestic demand, fluctuations in cotton prices, etc. The export of cotton yarn has suffered a huge impact, mainly due to the decrease in Chinese demand.　　 In the 2016/17 fiscal year, Indian cotton yarn exports to China fell by more than 25% compared to the 2013/14 fiscal year. Despite a year-on-year growth of approximately 47% in the 2018/19 fiscal year, exports to China in the first 10 months of the 2019/20 fiscal year fell by another 43%. China's import demand for cotton yarn began to shift to Vietnam, which can export cotton yarn to China without tax.　　 In 2019, the free trade agreement between China and Pakistan entered the second phase. Pakistan can export 350,000 tons of cotton yarn to China tax-free every year. In contrast, Indian cotton yarn exports to China still have a 3.5% tariff. The above situation weakens the advantage of Indian cotton yarn in the Chinese market.　　 In the first ten months of 2019/20, the average monthly export value of Indian cotton yarn was 16.16 billion rupees, which was much lower than the 227.8 billion rupees in the same period last fiscal year. At the same time, Indian cotton prices remain strong, especially in the first quarter of the 2019/20 fiscal year, which is contrary to the trend of international cotton prices, which makes Indian cotton yarn lose its competitive advantage in the export market.　　 In addition to the decrease in exports, the demand for cotton yarn in the domestic apparel industry in India has also remained sluggish in recent years. After two consecutive years of decline (2017/18 fiscal year and 2018/19 fiscal year), clothing exports in the first ten months of the 2019/20 fiscal year were almost flat (increased by 0.2%) compared to the same period of the previous year.　　According to the Cotton Association of India (CAI) forecast, India’s cotton production in 2020/21 will reach a record 35.45 million bales, a year-on-year increase of 14%. Due to the increase in production, India's domestic cotton prices began to fall back in the second quarter of this fiscal year. From July 2019 to February 2020, the average price of Shankar-6 varieties was about 9% lower than the same period last year. However, due to declining demand, yarn prices have also begun to adjust, resulting in a narrowing of the yarn-cotton price gap.　　 Due to the impact of the new crown epidemic, it is expected that in the next two quarters of this fiscal year, India’s demand for cotton yarn will drop significantly, and cotton yarn prices will fall further. As yarn sales are expected to decline, and most of the procurement costs have been fixed, the profit margin of the industry is expected to deteriorate further. Article keywords: 　India cotton yarn cotton yarn prices overseas textiles