Cotton imports continue to be high despite reduced international price

The latest edition of the India Ratings and Research (Ind-Ra) has stated that cotton imports in the country will continue to rise with local prices (minimum support price). The prices will be higher than the international prices. Until August 31, the cotton imports were upto 2.3 million bales, up 0.8 million bales than in the previous cotton season.

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Ind-Ra report

The report also suggested that it will further reduce domestic cotton prices. It also highlighted trends in sub-segments of the textile sector like cotton, man-made fibres, yarns, fabric with a focus on commodity prices, imports and exports, production and recent rating actions.

"Cotton prices continued to reduce in August 2019, mainly due to a fall in international prices. The agency expects the prices to fall further as global production is likely to be higher than demand growth," it said.

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Meanwhile, cotton yarn has been witnessing a fall in the exports because of low demand and increased competition. The exports fell down to over 40 percent back-to-back per month during July. This was due to 80 percent year-on-year fall in the demand from China. China has entered into the second phase of a free trade agreement with Pakistan on goods worth 64 billion dollars, of which cotton yarn directly competes with India's, said Ind-Ra in the report.

Additionally, artificial fibers witnessed a second consecutive month of stabilisation on stable crude oil prices in August. However, the price instability during September with the attack on Aramco oil refinery in Saudi Arabia led to a severe pressure on the synthetic fibres for a while. Following that, the prices have been corrected by 20 percent after some positive developments after the swift recovery of the attack sites. Apparel exports are seeing a moderate recovery with stabilising demand from the United States.

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Moreover, the US-China trade war has not inflicted any serious impact as the apparel exported by China for July were 35 percent higher than those in the previous month.

"India is yet to see the benefit in the trade war, as only a 10 per cent month-on-month increase in exports was recorded in July," said the report.

Capital expenditure in textiles has been majorly to replace machines with new technologies and add premium or niche products in the existing line-up. Outstanding projects have outpaced the completed ones due to muted demand, volatility in cotton prices and the US-China trade war.

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(With ANI Inputs)