Date:22/01/2005 URL: http://www.thehindubusinessline.com/2005/01/22/stories/2005012200771100.htm

Back Post-quota regime: Yarn exporters turning to domestic production

G. Gurumurthy

Coimbatore , Jan. 21

THE country's common genre textile exporters, more particularly the garment/made-up exporters, may be basking on early positive signals of business opportunities from the quota-free global textile regime. But the same may not be the case with the yarn exporters who are faced with a drooping order book for their commodity.

If the current market indications are to be taken seriously, it is likely that most spinners established in export markets will slice the export production considerably this year, as they fear that they can no longer maintain the same level of yarn exports they did in earlier years.

The downturn in yarn exports is obviously due to the preference among textile importers sourcing from India switching to indenting finished fabrics/garments by taking advantage of the total quota phase-out, instead of importing the intermediary product, namely yarn.

Textile industry and yarn trade sources said that many mills have already effected the switch by reducing export packing of yarn and instead are concentrating on production for local market where the prices too remained attractive compared to export prices.

The firming up of domestic yarn market is again due to the lift-up in the order bookings reported by most of the fabric producers or the textile made-up segments in the past one-month that are expected to fulfil the export commitment over the next two months.

Also, the yarn shippers now find that their produce gets at least Rs 15 per kg more in domestic market sale compared to export. As against the net price of Rs 120 for 30s combed cotton yarn in local market, the export price quoted as on date for the same count yarn is said to be $2.25 (equivalent to Rs 105). As for the 40s combed cotton yarn, the current price quote is around $2.65 a kg whereas the same yarn in local market is quoted at Rs 123, according to textile trade sources.

With the recent cut in export incentive for yarn shippers (in the form of a lower duty entitlement pass book scheme rate for yarn exports that has been trimmed down to 2.4 per cent at the beginning of this month), many in the trade find exports unremunerative.

On the contrary, the mills that had migrated to selling for local market, have managed to fully book their January production, thanks to the brisk woven/knitted fabric market.