Gujarat’s spinning units fear weakening of global yarn demand

Having been hit already by a spike in cotton prices, the spinning industry in Gujarat is fearing decline in the international as well as global demand of cotton yarn due to the ongoing Russia-Ukraine tension.

Over the past six months, over 600 spinning units across Gujarat have been facing challenges of continuous increase in cotton prices, says Chintan Thaker, president, Welspun Group adding, “Over the period of time cotton prices have jumped from nearly Rs 5,000 per candy (356 kg per candy) to around Rs 80,000 per candy at present. As a result, production cost of spinning mills and composite textile units have gone up sharply. Interestingly, prices of cotton yarn are not increasing due to limited demand.”

Thaker, also chairman of Assocham-Gujarat, says spinning units are in a Catch-22 situation; on one hand prices of cotton have inflated and on the other hand, fabric makers are unwilling to pay higher prices of yarn. Even bigger player like the Welspun group are feeling the heat of enhanced cotton prices despite captive consumption of yarn, he said, adding that already such firms took huge orders when cotton prices were hovering at Rs 42,000- Rs45,000.

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“With cotton prices having almost doubled, most of the export-making units are making loss as they are bound to fulfil the orders. Now geo-political issues between Ukraine and Russia are an add-on factor… If the prices of crude oil increase, production cost will further go up. There would be adverse an impact on logistic cost too,” he said.

Following Russia’s invasion of Ukraine, international market sentiments have already changed, says Bharat Boghra, chairman of Spinners Association – Gujarat adding, “Overall textile demand would go down if the war situation continues for a longer period. Cotton fabric makers have become more cautious in buying cotton yarn. Compared to last month, prices of cotton yarns have dipped by Rs 40 per kg.

Not only Gujarat, but India’s textile strength lies is in value-added exports. A recent hike in input cost and the added factor of the Russia-Ukraine war are having adverse impact on important textile clusters across the country, which include Ahmedabad. Higher cotton prices and uncertainty due to war between the two eastern European countries have also encouraged traders to hoard cotton, says a spinning unit owner requesting anonymity. According to him, due to such activities, cotton may become even dearer for spinning units.