Cotton Demand Issues Dominate India’s Textile Ecosystem
November 9, 2023 Weak demand for textiles is dominating the cotton ecosystem.
“Global demand for textiles has come down, leading to cascading effects such as unit closures in South India,” states Gandhiraj Krishnasamy, General Manager-Sales at Coimbatore-based Lakshmi Card Clothing.
India, being the second largest producer of cotton, is expected to produce 20 lakhs (2 million) bales (170 Kgs each) less in the 2023-24 season which began in October compared to last season.
On Nov. 6, India’s Committee on Cotton Production and Consumption (COCPC), under the Ministry of Textiles, met in Mumbai. Based on the official data released after the meeting, the crop estimates for the 2023-24 season will be lower than the 2022-23 season.
While production is projected to be less due to higher opening stock of 64.08 lakh bales (6.4 million), supply will be marginally higher than last year. Total demand will be slightly higher for 2023-24 at 33.5 million bales (170 Kgs each).
These projections show that the cotton situation in India is unchanged from last season, with a tight supply and not a sufficient increase in demand.
Demand enhancement is needed, say cotton and textile executives I spoke with. Agreeing that demand is the issue, “Spinners are not building inventory,” says Gnanasekar Thiagarajan, Director of Mumbai-based Commtrendz Research.
“Being the Diwali festive season, we hoped that the demand for domestic textile goods will pick up, but that is not the case,” states Velmurugan Shanmugam, General Manager of an Aruppukkottai-based cotton spinning mill with 72,000 spindles. “Normally at peak season, we process 3,500 bales/month, but our consumption has been reduced to 2,800 bales/month.”
“Given the expected reduced cotton production in states like Telangana, prices should have climbed up, but that is not the situation,” points out Thiagarajan.
Trade imbalances, the cost of power in India, and reduced global demand are affecting the country’s textile situation, which is having a global effect.
Interestingly, with the lowering of cotton prices, spinning margins have also come down. It should be the other way, provided there is demand for textiles, observes Krishnasamy.
Interactions with spinning mill executives reveal that mills are selling yarns at a loss of about Rupees five per Kg.
Trade imbalances, such as the availability of imported fabrics from China and garments from low-wage countries, have made Indian products uncompetitive, leading to the demand slump.
“There is no uptake of garments from Tiruppur region, which is a knitted garment hub,” notes Krishnasamy. “Many garment units and open-end spinning units have announced closures until Nov. 25.”
I have been insisting that textile mills pay close attention to the geo-political situation, global economy, demand, and supply before making any decision regarding expansion and inventory buildup. At the time of the Textile Association (India)-South India Unit in Coimbatore in summer 2022, the price of cotton in India was in the upwards of Rs. 80,000 per candy (356 Kgs). My opinion then was that such a high price will not help with the demand, and that the market must cool down.
Today, when Sankar-6 variety is at Rs. 57,000 per candy, demand is weak due to the above factors. This price in India is close to the minimum support price (MSP), and the industry is hoping that if that situation happens, it will support the entire cotton ecosystem.
Demand is the catch word. “Let us hope that the Christmas spirit is good so that global demand picks up,” states Thiagarajan.
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