Festive season demand helps lift textile prices: Ind-Ra Report

Healthy festive and export demand lifted the prices of textile products in November 2020, said India Ratings and Research (Ind-Ra).
According to Ind-Ra, cotton prices inched up by 2-4 per cent on a month-on-month (MoM) basis and were even higher on a year-on-year (YoY) basis during November 2020.
“The incremental demand from spinning mills coupled with a higher demand for cotton seeds amid a continued supply deficit led to the rise in cotton prices,” the ratings agency said in a report.
“Cotton Corporation of India continued their support in form of market procurement during the current crop season. The spread of international cotton over domestic cotton remained steady during October-November 2020.”
Besides, it cited that domestic cotton yarn production continued to grow on both MoM and YoY basis at 3.3 per cent and 2 per cent, respectively, on back of a high export demand.
“However, the increase in raw material costs was lesser than yarn prices, resulting in higher gross margins for sector players during 2QFY21-3QFY21,” the report said.
“Exports increased substantially YoY in September 2020 and are likely to moderate during 3QFY21 upon the execution of winter season orders by key importers.”
Furthermore, it said yarn sector will likely benefit from an improved competitive situation with consolidation in the sector because of the liquidity crunch being faced by several small and mid-players.
In addition, the ratings agency pointed out that cotton cloth fabric prices gained momentum during October 2020, led by an incremental demand because of the festive season and opening of retail stores and malls; however, other fabric prices remained soft.
“The production of knitted fabrics and PSF or viscose staple fibre remained marginally lower; however, that of woven fabrics improved 15 per cent YoY in September 2020, reflecting a gradual recovery.”
“Fabric exports increased 13 per cent MoM, while remaining lower 11 per cent YoY. Fabric players reported substantial operating losses compared to readymade garment players, on account of the closure of retail stores, malls during 1HFY21 and would remain weak for 2HFY21, given the social distancing and fear of a second wave of the pandemic.”