The Indian cotton and yarn market is facing challenges due to global economic concerns, which will affect the export market and limit demand in downstream industries. Experts predict that the Indian cotton yarn market may see some support in April, but natural fiber prices are already high, so cotton prices are unlikely to rise significantly.
So far, the cumulative volume of new cotton on the market in India has reached 18 million (170 kg), a decrease of 5 million bales from the 23 million bales in the same period last year. In February 2023, the Cotton Association of India (CAI) lowered its cotton production estimate to 31.3 million bales, slightly higher than the previous year’s 30.7 million bales.
Currently, Indian farmers still have about 40% of their crops. Although the cotton market volume is lower, as Indian cotton prices are higher than international prices, this gap has hindered the export of Indian cotton. So far, India has exported only 800,000 bales of cotton this season. CAI India expects to export 3 million bales of cotton this quarter, compared with 4.3 million bales in the previous season. Expectations may not materialize due to continued price disparity.
It is worth noting that India’s cotton consumption has decreased due to the reduction in spinning production in India. This is largely due to the cold downstream demand and inverted internal and external prices, which has hindered spinners from increasing production. In response to more expensive cotton, many large yarn mills in northern India have switched to producing polyester-cotton blends and polyester yarns. CAI has confirmed the consumption forecast, with India’s cotton consumption falling from 31.8 million bales to 30 million bales. Industry experts predict that consumption may fall further due to lower production.
The decline in production was partly offset by poor apparel demand in export markets and the domestic market. In addition, the decrease in cotton exports also compensated for the decrease in cotton production.
A trader from Gujarat said cotton prices in India are unlikely to rise significantly due to differences at various levels. Ginning and spinning mills face discrepancies that limit production, while market uncertainty also leads to reduced inventories in supply chain channels. If buyers from the downstream industry return to the market in April to build inventories for the off-season, cotton prices may improve, but the upward trend may be very limited.
The Indian cotton yarn industry expects market demand to improve next month, but demand from end consumers remains uncertain. They believe that the cotton yarn market runs on domestic demand, while export demand remains poor. Recent turbulence in U.S. and European financial markets has also affected market sentiment. Indian exporters expect orders from global brands to pick up from June, but high inflation, rising interest rates and economic concerns may disappoint them.
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