“Rising raw material prices and rupee depreciation are going to make the entire textile products costlier. Synthetic textile industry is already working with a wafer thin margin. Since there is no room for the industry to absorb the raw material price hike, the cost-push, therefore, has to be passed on to consumers,” said O P Lohia, Managing Director, Indo Rama Synthetics (India) Ltd, one of India’s largest producers of synthetic textiles.
The benchmark Brent crude oil prices have jumped by a staggering 12.9 per cent in the previous one month to trade at $78.9 a barrel on Tuesday. Also, the rupee has depreciated by 4.1 per cent in the last one month to quote at 72.9 against a dollar on Tuesday.
Meanwhile, the Union Ministry of Agriculture has estimated India’s cotton output at 34.89 million bales (of 170 kgs each) for the crop year 2017-18 (ending September 2018), a rise of 32.58 million bales from the previous year. For the ongoing kharif sowing season, however, pink bollworm attack is set to affect India’s cotton crop area by 10-20 per cent of the total area sown of 12.06 million hectares as of September 14.
Demand from China is set to increase in favour of India following a heavy import duty levied on cotton imports from China and also a 20-25 per cent of cotton output in Pakistan expected to decline by a fourth, the fibre prices are likely to remain elevated.
“With limited supply in the market during H1 cotton season 2018-19 on account of increased orders from China, prices are expected to register a growth of about 5-7 per cent and reach Rs 122-125 per kg during this period and average at about Rs 127-130 per kg for the season 2018-19 registering a y-o-y growth of about 9-11 per cent,” said Madan Sabnavis, Chief Economist, Care Ratings.
But, given that analysts forecast crude oil price to remain firm, synthetic fibre and yarn prices may also remain firm with its consumption to partly replace by derivatives of the natural fibre.
“An improvement in cotton price to polyester staple fibre price spread is likely to result in volume growth of synthetic textiles and support the profitability of the synthetic value chain,” said Prakash P, Analyst, India Ratings and Research.