Healthy festive and export demand lifted the prices of textile products in November 2020, said India Ratings and Research (Ind-Ra).
According to Ind-Ra, cotton prices inched up by 2-4 per cent on a month-on-month (MoM) basis and were even higher on a year-on-year (YoY) basis during November 2020.
“The incremental demand from spinning mills coupled with a higher demand for cotton seeds amid a continued supply deficit led to the rise in cotton prices,” the ratings agency said in a report.
“Cotton Corporation of India continued their support in form of market procurement during the current crop season. The spread of international cotton over domestic cotton remained steady during October-November 2020.”
Besides, it cited that domestic cotton yarn production continued to grow on both MoM and YoY basis at 3.3 per cent and 2 per cent, respectively, on back of a high export demand.
“However, the increase in raw material costs was lesser than yarn prices, resulting in higher gross margins for sector players during 2QFY21-3QFY21,” the report said.
“Exports increased substantially YoY in September 2020 and are likely to moderate during 3QFY21 upon the execution of winter season orders by key importers.”
Furthermore, it said yarn sector will likely benefit from an improved competitive situation with consolidation in the sector because of the liquidity crunch being faced by several small and mid-players.