By Seshadri Ramkumar, Professor, Texas Tech University
Natural calamities and manmade actions are having a negative impact on the textile sector.
With cotton prices trading high probably due to speculation, downstream textile processing units are under stress. Raw materials cost, supply chain issues, power situation in India, pandemic effect are all contributing to the current roller coaster situation.
“There is no need to go into a panic mood and stockpile cotton,” stated Mr. Velmurugan Shanmugam, General Manager of Aruppukkottai, India-based Jayalakshmi Textiles. Jayalakshmi Textiles is a leading cotton spinning mill with 70,000 ring spindles with an average yarn count of 75s Ne. Mills in India start buying the new crop during November and January months. Mills are waiting and watching and opting for short term stocking cotton. “Right now, we are stocking 10 days’ worth of cotton only,” added Velmurugan Shanmugam.
Globally, there is demand for cotton due to tight supply and lack of last year’s crop of good quality. As the world is moving away from the severe COVID-19 situation, stimulus monies provided by governments like the United States is helping with consumer demand.
The price hike is not limited to cotton alone, polyester prices are increasing. “Polyester price has increased by about 35%, due to hike in crude’s price and supply chain issues,” stated Mr. Krishnasamy Pothiraj, Coimbatore, India-based textile consultant. The power shortage in India, especially coal shortage is affecting manufacturing sectors such as cotton ginning. Petroleum based products are having price increases, resulting in price enhancements in fertilizers, etc. All these factors are having a compounding effect on raw materials’ price.
With the major “Diwali,” festival season nearly over in India, how consumers react to price increases is interesting to watch. Textile industry must carefully watch the market and pay attention to consumer sentiments before going for stockpiling of raw materials. While the raw material price increase is being absorbed currently by the downstream processors, it may not be sustainable. Going on panic buying will lead to a situation as witnessed in 2011, which will not work, agrees Velmurugan Shanmugam. Industry is under watch and wait situation—a right plan at the present scenario.
