Cheaper U.S. Cotton Appeals to Indian Textile Companies
Despite a spike in production, the Indian textile industry finds it more profitable to import cotton from the U.S.
April 2, 2009
High-priced Indian cotton is on a losing streak both in the global and domestic markets. Firm cotton prices have forced a couple of textile companies, especially denim manufactures, to source cheaper cotton from the US. For example, Ahmedabad-based textile firms Aarvee Denims and Arvind have already imported a sizeable quantity from the US this year.
“At present, Indian cotton is quoted around Rs 22,500 per candy, while the landed cost of US cotton works out to be nearly Rs 22,000 per bale. Two days back, we booked 7,000 bales (1 bale=170 kg) at 46 cents per pound. So far, Aarvee Denims has imported 30,000 bales from the US,” said Ashish Shah, managing director, Aarvee Denims.
Leading denim manufacturer Arvind is said to have imported 100,000 bales from the US at around 41-44 cents a pound. However, the market players said that the cotton imported by Arvind was almost three-years-old and not the fresh stock. “Indian prices are not reliable. High prices following a steep hike in cotton MSP have left us with no option but to import. In case of imports, we also get good quality cotton on a 90-day credit,” Shah added.
In the past few weeks, cotton prices have sharply moved up in the domestic market. “The prices have jumped by around Rs 1,800 a candy in the last 15 days to close at Rs 22,500,” said Arun Dalal, owner of Arun Dalal & Co, a leading cotton trading firm based in Ahmedabad.
“If we take the present price level into account, we cannot export the Sankar-6 variety of cotton below 57 cents, while the same quality of cotton from the US fetches 54 cents in the global market,” said Kishor Shah, president, Central Gujarat Cotton Dealers Association.
Higher prices of Indian cotton have helped the US to make a dent in India’s global market share. Cotton buyers such as China, Turkey and Egypt have turned to cheaper cotton imports, resulting in exports from India during the cotton year 2008/09 (ending September) to be around 2.5 million bales as against 8.5 million bales. “As on March 31, the total export commitment from India stood at 1.86 million bales, of which 750,000 bales were shipped till February-end,” said Dalal.
According to sources, 600,000 bales were imported in 2007-08. This year, imports are likely to see a quantum jump to 1 million bales as 600,000 bales have already been imported.