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Gujarat: Spinners cut cotton procurement by 50%

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May 12, 2022 AHMEDABAD: With cotton prices soaring to Rs 97,000 per candy, the procurement of cotton by yarn manufacturers has declined sharply. Estimates of Spinners’ Association of Gujarat (SAG) suggest that over the past month, yarn demand has declined due to the increase in prices. Consequently, spinning units in Gujarat have reduced cotton procurement to 50%, to 3.1 lakh bales per month instead of 6.2 lakh bales per month.
Cotton prices went up by 25% over the past three months or so up from Rs 76,000 per candy around January-end to Rs 97,000 per candy currently.
“With the rise in cotton prices, the cost of production has gone up. On the other hand, realizations have taken a major hit,” said Saurin Parikh, president, SAG. “Spinners are unable to pass on costs to their end-consumers. Therefore, spinning units are procuring only what is needed.”
At present, the demand in the international market has also been affected. An estimated 60% of the yarn produced here is exported and the demand slide is a major dent to the business.
With increasing cost of production, spinners are facing net cash losses worth about 10% to the tune of Rs 30 per kg. For instance, 30 CCH cotton yarn is sold at about Rs 385 per kg. However, it is produced for Rs 410 per kg. Similarly, 40 CCH cotton is manufactured at Rs 450 per kg and sold at Rs 420 per kg.
“Some spinning units have switched to a five-day work week,” said Rippal Shah, an Ahmedabad-based yarn manufacturer. “Not only is the production down but the order volumes have also dipped. This is certainly not a good sign for the industry.”
“Since the last week of March the demand has reduced. Exports of cotton yarn have almost stopped and the domestic demand is very weak too,” said Shah. “Currently, there are no takers for cotton yarn because of the low demand in the international market.” According to SAG, all mills have reduced their cotton consumption and yarn production by 30% to 40%.

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