Seshadri Ramkumar, Professor, Texas Tech University, USA
Demand for textiles is weak which dominates the cotton ecosystem.
“Global demand for textiles has come down leading to cascading effects such as unit closures in South India,” stated Gandhiraj Krishnasamy, General Manager-Sales at Coimbatore-based Lakshmi Card Clothing.
India being the second largest producer of cotton is expected to produce 20 lakhs (2 million) bales (170 Kgs each) less in the 2023-24 season beginning this October as against last season. On November 6, India’s Committee on Cotton Production and Consumption (COCPC), under the Ministry of Textiles held its meeting in Mumbai. Based on the official data released after the meeting, the crop estimates for the new season beginning on October 1 will be lower than the 2022-23 season.
While production is projected to be less, due to higher opening stock of 64.08 lakh bales (6.4 million), supply will be marginally higher than last year. Total demand will be slightly higher for 2023-24 at 33.5 million bales (170 Kgs each). Above projections show that the cotton situation in India is as the last season with a tight supply and not a sufficient increase in demand.
Demand enhancement is needed is the general sentiment I got by discussing with cotton and textile mills executives. Agreeing that the demand is the issue, “spinners are not building inventory,” opined Gnanasekar Thiagarajan, Director of Mumbai-based Commtrendz Research.
“Being the Diwali festive season, we hoped that the demand for domestic textile goods will pick up, but that is not the case,” stated Velmurugan Shanmugam, General manager of Aruppukkottai-based cotton spinning mill, which has 72,000 spindles. “Normally at peak season, we process 3,500 bales/month but our consumption has been reduced to 2,800 bales/month,” added Velmurugan Shanmugam. “Given the expected reduced cotton production in states like Telangana, prices should have climbed up, but that is not the situation,” stated Gnanasekar Thiagarajan.
Trade imbalances, power cost in India, reduced global demand are affecting the textile situation in India, which is having a global effect.
Interestingly with the lowering of cotton prices, spinning margins have also come down. It should be the other way, provided there was demand for textiles, observed Gandhiraj Krishnasamy. Interactions with spinning mill executives reveal that mills are selling yarns at a loss of about Rupees five per Kg. Trade imbalances such as the availability of imported fabrics from China and garments from low-wage countries have made Indian products uncompetitive leading to demand slump.
“There is no uptake of garments from Tiruppur region, which is a knitted garment hub,” stated Gandhiraj Krishnasamy. Many garment units and open-end spinning units have announced closures from today till November 25th, added Gandhiraj Krishnasamy.
I have been insisting that textile mills pay close attention to geo-political situation, global economy, demand, and supply situation before making any decision with expansion and inventory buildup. In a major event hosted by the Textile Association (India)-South India Unit, in Coimbatore during the summer of 2022, when the price of cotton in India was in the upwards of Rs. 80,000 per candy (356 Kgs), my opinion was that such a high price will not help with the demand, and the market must cool down. Today, when Sankar-6 variety is at Rs. 57,000 per candy, demand is weak due to the above factors. This price in India is close to the minimum support price (MSP), and the industry is hoping that if that situation happens, it will support the entire cotton ecosystem. Demand is the catch word. “Let us hope that the Christmas spirit is good so that global demand picks up,” stated Gnanasekar Thiagarajan.