Login ID:
Partner Login
Contact Us : 7066511911

Cotton Special: Yarn Prices To Stabilise Post March'21; Eyes on Global Cotton Prices, Chinese Demand

19 Jan 2021 4:07 pm
 Comments 0 Comments  |  Comments Post Comment  |  Font Size A A A 

New Delhi (Commodities Control) - Cotton yarn prices have been trekking northwards post the strict lockdown restrictions during Covid-led pandemic. However the textiles industry along with the market participants now keenly look forward to the price outlook.

So far, experts' view suggests that domestic cotton/yarn prices are closely tracking global cotton price trends. Upward price trend in international cotton is underpinning domestic cotton rates. However if the global prices stabilise post March, as widely believed, yarn prices will ease too.

Cotton yarn prices are seen cooling off, as the mills that were forced to shut during pandemic resume operations, raising production that will ensure smooth supplies.

Market stalwarts observe that a cool-off in cotton/yarn prices is desirable in order to restore equilibrium in downstream industry and various sectors of textiles back in balance. This, they believe, could take around 3-4 months.

Economic activity has picked pace after the lockdown restrictions were lifted, due to which robust demand for garments--casuals and knitted wear has been registered from rural India. Increased demand for cotton yarn, while the supply shortage with spinners reducing yarn output has led to skyrocketing yarn prices, for all the categories.

The price per kilogram (kg) of woven cotton yarn increased from Rs 193.81 in August last year to Rs 267 in January this year—a 37.7 per cent rise. Indian cotton year extends from October to September.

The prices in September, October, November and December were Rs 205.23, Rs 210.45, Rs 235.10 and Rs 242.22 respectively. The January 2021 price is 10.23 per cent more than the price in the previous month.

According to a report by Fibre2Fashion, the sharp rise in cotton yarn prices in the last few weeks is because of dried-up inventories as supplies have failed to match demand and spinning mills resumed operations late across the country.

Cotton yarn price has risen because of high domestic and export demand. Huge orders are coming in from Bangladesh and Vietnam.

Firmness in the domestic market is attributed to significant price rise in global markets, where ICE cotton futures has surged nearly 20% since December. Strength in global cotton prices is due to anticipation of lower world cotton output and improved stock-usage ratio. This goes to prove that cotton yarn prices will cool off only when cotton prices halt

However fundamental and technical cues point towards extended price rally, wherein ICE cotton active futures is seen reaching 85 cents/per lb in the near future.

While March futures is hovering around 81 cents, May futures has moved past 82 cents per lb.

So far, market experts see a strong resistance at 85 cents level from whereICE cotton futures rates are likely to cool off a bit.

Cotton yarn industry in the country is trying to get back on track, although the pace is too slow at the moment. Spinning mills were the worst hit amid lack of fiscal support. Most of the mills had to shut down their operations.

Yarn output in the country touched early 500 crore Kgs in the previous financial year, while the share of cotton yarn in this was close to 71%. In the current Financial year, cotton yarn output has declined by 76%, although some improvement was registered post May 2020.

Having said so, the annual output was still weaker until August 2020. It is only during September and October that the output witnessed a rise of 3% each. Looking at the bright side, strengthening yarn prices improved the financial status of the spinners.

According to Indian Texpreneurs Federation, exports of cotton yarn, fabrics and made-ups during September to December rose from 10% to 19%, on an annual basis. Infact, exports of ready-made garments, ever since September, have risen 13.54% every month.

This is likely to shape the direction of yarn prices along with export demand of cotton ahead.

Indian cotton cotton, due to its rates being cheaper as compared with global prices, has an excellent price parity, due to which exports are seen rising from 50 Lakh bales in the previous FY to 60-65 lakh bales this year. Demand for cotton yarn is anticipated to rise in global markets too.

Another theory suggests that improved demand from spinning mills can raise domestic consumption too.

This also depends on the spread between cotton and cotton yarn prices.

Technical charts of cotton on ZCE are indicative of rising Chinese demand for Indian cotton yarn in the near future. Price Chart analysis suggests rise after September 2020. The rates rose from 19,000 Yuan per Tonne to 21,500 Yuan per Tonne in December. Market spots a resistance at 24,000 Yuan per Tonne. The spread between Chinese Cotton yarn and Cotton No.1 is expanding rapidly. Historical trend indicates that since mid-2017, the spread has been within the range of 1.3x-1.6x. At the moment, the spread is located near 1.4x, while treading higher.

Having said so, the rise in China's yarn prices will underpin price rise in Indian yarn prices and strengthen exports too. However, after it peaks at/near 24,000 yuan/Tonne, Indian fibre prices will stabilise too.

According to SIMA chairman, Ashwin Chandran, ‘in the backdrop of improved financial status, spinning mills are now likely to focus on raising output along with their expansion plans’.

Meanwhile NITMA’s Sanjay Garg hopes that ‘overheated yarn prices should cool off with rising supplies’

(Commodities control Bureau)

  Rate this story 1 out of 52 out of 53 out of 54 out of 55 out of 5 Rated

   Post comment
Comment :

Note : This forum is moderated. We reserve the right to not publish and/or edit the comment on the site, if the comment is offensive, contains inappropriate data or violates our editorial policy.
Name :  
Email :  

Top | Post Comment  

Latest Market Commentary
Sharp Fall In Mustard Seed, Oil Prices As Arrival Reach...
Uttar Pradesh Sugar Mill Prices -03 MARCH 2021
Soy Complex Soybeans (CBT) Consolidating in a Short...
Soy Meal (CBT) Weak Price Trend / Next Potential Supp...
Soy Complex Soybean Oil (CBT) Short-term Extended /...
Top 5 News
Chana Traded Mixed in Major Spot Mkts
Traders Were Cautious Despite Gains In Guar, Gum, Dispa...
Weak Buying at Higher Rates Reigns in Rally in Masoor
Coriander Loses Colour amid Weak Buying, Arrivals Press...
Sharp Fall In Mustard Seed, Oil Prices As Arrival Reach...
Top 5 Special Reports
Weekly: Chana-Masoor Prices Gain Most This Week, Urad-...
Weekly: ICE Cotton Suffers First Weekly Drop in Februar...
Weekly: Bullish Factors Intact in NY Sugar as Fund Buyi...
Pulses Special: Government Procurement Key to Price Ral...
Weekly: NY Cotton Extends Upward Rally, Finishes Above...
Copyright © CC Commodity Info Services LLP. All rights reserved.