India: Market Snapshot; Request to Drop Tariff on Imported Yarn

In the past, pressure from textile manufacturers in India has moved government officials to ban the export of cotton, and now that same group is requesting that the national 10% tariff on imported yarn be dropped as well. That’s because the local cotton price has increased 3% to 5% in the last two months while yarn prices have increased 15% during that same period.

That increase has made Indian yarn less competitive than that offered by spinners in other countries, especially Pakistan, where costs are about 10% lower ($3.60/kg in India and $3.30/kg in Pakistan).

A brief snapshot of India’s cotton market is below (information provided by Raja P. Gokulgandhi of Pravinkumar Ramdas):

• Indian S6 cotton and Mech-1 (cotton originating in Maharashtra and Madhya Pradesh) are each trading at 90 cents/lb.
• For the country as a whole, seasonal rainfall through August was 12% below the seasonal norm (it was 14% beneath the average as of the week ending 22 August).
• The most recent estimate of current season cotton plantings is reported at 11.28 million hectares.
• Cotton prices were subdued because of the rains reported in most of cotton growing centers, including Gujarat.
• Mill demand has been low for imported cotton, but local cotton is still being traded in good quantities.
• Mills have bought Gujarat S6 cotton at 83.7 cents/lb to 84.8 cents/lb in the last 2-3 days, while MCU 5 traded at 93.5 cents/lb.
• The rains expected this week should be favorable to the cotton crop. Cotton prices are expected to ease steadily with little demand for exports.