India Ratings fears high cost to dampen textile demand

India Ratings fears high cost to dampen textile demand

Higher raw material cost is likely to impact textile demand during Q1FY23 on a quarter-on-quarter basis. As per India Ratings and Research (Ind-Ra).

Higher raw material cost is likely to impact textile demand during Q1FY23 on a quarter-on-quarter basis. As per India Ratings and Research (Ind-Ra).

The sustained rub-off impact from high man-made fibre (MMF) prices amid new arrivals will keep domestic cotton prices to remain at the current high levels during Q1FY23.

Shradha Saraogi, Senior Analyst, India Ratings and Research, said that rising cotton and MMF prices are likely to moderate demand for textile fabrics, made-ups, and garments as the downstream prices will also rise in tandem with the raw materials.

It generally may also lead to downtrading. Besides, Ind-Ra expects inventory levels to decline by the end of the current cotton season due to a lower opening stock and slightly higher consumption. Similarly, the domestic stocks-to-use ratio could decline in the new cotton season, as per the rating agency.

Furthermore, Ind-Ra expects cotton yarn and spun yarn prices to continue to rise due to higher demand from downstream players as well as export markets. Cotton yarn prices increased 3 percent, MoM, in February 2022 due to the rise in cotton prices as well as a reduction in the production amid the high export and domestic demand. The spreads increased up to Rs 60.14 per kg in February 2022.

According to the ratings agency, MMF products witnessed a drastic rise in prices in February 2022 due to an increase in crude oil prices. Ind-Ra expects the prices to increase further owing to the US ban on Russian oil and US tie-ups in Europe, along with a rise in raw material prices, led by the ongoing geopolitical issues and increased cotton prices.

Source: SME Features

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