After hitting a multi-year low last fiscal, cotton yarn spinning companies’
profit margins have improved in the December quarter due to revival in
export and rupee depreciation.
However, sustainability of profit is already threatened by rising cotton prices
and competitive pressure from Vietnam and Bangladesh.
Over 90 per cent of increase in exports to China in first seven months this
fiscal helped Indian spinners regain a part of the export market lost to
competing nations such as Vietnam over the past few years, said the rating
agency ICRA.
However, the difference between domestic and international cotton prices
have fallen to eight per cent in the quarter ended December quarter from 16
per cent logged in June quarter, adding to competitive pressures from
Vietnam.
Besides, incremental developments on the US-China trade row can play a key
role in influencing India’s export prospects, ICRA added.
After growing at a strong pace of 50 per cent in five months of FY’19, India’s
cotton yarn exports have normalised to 34 per cent in October.
ICRA expects the annual cotton yarn exports to grow at 18-20 per cent this
fiscal supported by a strong beginning.
Jayanta Roy, Senior Vice-President, ICRA, said healthy demand and higher
cotton prices have shifted cotton yarn realisation into a higher trajectory this
year, with realisations averaging 13 per cent higher against an 11 per cent
increase in cotton prices from last year.
Source: The Hindu Business Line, India Wednesday, 16 January 2019