| Indian apparel manufacturers have locked horns with spinning mills over the issue of drop in cotton yarn prices, which has prompted the 1,250 mills in the country to idle production by 30 per cent in order to bring back some stability in the market from today.
The apparel manufacturers, which use cotton yarn from the mills as their chief raw material, have punched holes in the statement made by the mills that the current glut situation in the yarn market is an upshot of restrictions on yarn exports that dragged down prices.
The 1,250-odd spinning mills in the country are at present faced with a combined inventory of about 500 million kg of unsold stocks, accounting for about two months of production. Mill owners claim that the restriction on export of yarn for three months from mid-January, at a time when global prices and demand were on a firm note, was the primary reason for the inventory build up.
Apparel manufacturers, represented by the Apparel Export Promotion Council (AEPC) and Tirupur Exporters Association, on the other hand, claim that the cardinal reason for the sudden drop in prices was the "unprecedented hike by 100 to 150 per cent in yarn prices and the corresponding increase in fabric prices last year".
The Andhra Pradesh Spinning Mills Association (APSMA) points out that the spiral in yarn prices was reflective of the nearly 120 per cent increase in cotton prices, from Rs 27,000 a candy in November last to over Rs 62,000 a candy a few months ago.
The situation was accentuated with a capacity addition of about 15 per cent in the spinning mills sector last year, with yarn production touching 39,000 million kg.
Meanwhile, APSMA has pointed out that the cut in production is showing signs of stability returning to the market. "In the last few days, we have seen a 5-10 per cent correction in yarn prices," Mr Agarwal said.
The mill owners will be reviewing the situation after a couple of weeks and decide whether to increase or stop idle production
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