Demand supply gap to determine future yarn prices in India

The second COVID-19 wave is breaking the back of the Indian yarn industry. The exodus of migrant workers and curfews are impacting the operating rate time of many yarn mills in the country. As CCF Group reports states, some mills are currently operating at 70 per cent of their capacities.

Mills’ operating rates drop

Spinners in Maharashtra are fast losing workers who fled the city as soon as the second wave broke out. The operating rate of yarn mills in New Delhi has declined. Similarly, the comprehensive operating rate of yarn mills in Andhra Pradesh has declined to 80 per cent due to curfew and lockdown. Ring-spun and open-end yarn mills in the state are currently operating at 70 per cent operating rate and have been unable to operate for 24 hours a day. Their inventory levels have increased to 45 days due to a sharp decline in sales.

Ring-spun mills in Gujarat are also reporting loss of workers and many migrant workers have left the state. Punjab is the only state which is still seeing a 100 per cent operating rate as it has provided accommodation facilities to its migrant workers.

Weakening local demand to impact overseas market

Recurrent lockdowns are expected to affect operating rates and output of Indian yarn mills further. They are also likely to impact yarn supply, preventing prices from declining. Though the demand from overseas market has not been greatly affected, the epidemic has weakened local downstream demand, which in the last two months, has played a key role in supporting yarn prices.

Experts fear, declining demand in local market may make India more dependent on the Chinese market, weakening its bargaining power. To prevent this, India needs to control the spread of epidemic and boost operations of combed yarn mills that have not yet fulfilled previous contracts. The future of yarn prices will mainly depend on which of the two parameters -- supply or demand weakens more severely.