CHENNAI, FEB. 15:
Cotton exports are showing signs of recovery with registrations for shipments jumping 20 lakh bales since the beginning of the year.
According to sources, registration for cotton exports has increased to 58 lakh bales from 38 lakh bales. However, cotton trade and analysts say that it may be less than 50 lakh bales only.
Sources said that exporters are now buying half of the two lakh bales (of 170 kg) that are arriving daily in the market. While the Cotton Corporation of India is procuring some 40,000 bales, domestic textile mills are buying 60,000 bales.
However, views of cotton prices looking are unanimous. Currently, the Shankar-6 variety that is in demand for exports is quoting at Rs 35,000 for a candy of 356 kg.
“Till January end, 42-43 lakh bales had been registered for exports. Maybe, it could have touched 50 lakh bales,” said A. Ramani, a cotton trade analyst.
“We are not sure if so much would have been registered because if that is a case, we would be seeing unusual movement. That doesn’t seem to be happening,” said Anand Poppat, Secretary of Saurashtra Ginners Association.
Ramani said exporters could be buying ahead of the annual import quota that China would release soon after the Chinese New Year.
“China will be releasing an import quota of 682,000 tonnes under the tariff rate quota and Indian cotton could get a sizeable chunk of it,” Ramani said.
China has to compulsorily release the tariff quota under which cotton imports would be imposed with 1 per cent Customs duty.
“Otherwise in the normal course, China imposes 40 per cent duty,” said Poppat.
“Still Indian cotton is cheaper compared with the prices in the domestic market there,” he said.
Currently, cotton in Chinese domestic market costs around 19,000-20,000 yuan a tonne. In comparison, the landed cost of Indian cotton after paying the Customs duty is 17,000 yuan. “Besides, Pakistan and Bangladesh are seeking some 35 lakh bales. This is something that can keep prices firm,” Poppat said. Ramani said exporters to China are taking a calculated risk by buying stocks and moving it to bonded warehouses in China. “Some Chinese buyers with deep pockets have bought Indian cotton and moved them closer to their shores,” he said.
On the other hand, a sizeable quantity of cotton from the US has also been moved close to the Chinese shores.
“Export buying is keeping the market firm though there is no flare-up in prices,” Ramani said.
Chinese trick helps Indian spinners
There is also a shift in strategy by Chinese textile industry that has begun buying cotton yarn.
“This is because it is advantageous to import cotton yarn rather than raw cotton. The industry has to pay 13 per cent value-added tax in China for buying raw cotton. They need not pay for importing yarn,” said Ramani.
According to sources, spinning units here are making a margin of at least $1 a kg. “It may not be true in the case of all units. China is good at negotiating deals. They are buying 30s count yarn for $3.20 a kg against $5.60 a kg a few days ago,” Ramani said.
“Also, there is no duty on yarn imports in China,” said Poppat. The Chinese order is mainly helping only units to the north of the peninsula. “Power crisis in the South is affecting spinners,” Ramani said.
A spinning unit having captive power unit has to spend Rs 20-30 a kg for a kg of yarn. Otherwise, it costs Rs 4-5 a kg only.
“Mills in North India are definitely gaining from the yarn export,” Ramani said, adding, “exports are fantastic and volumes are excellent.”
Sources said that yarn exports could be a record one billion kg. Already, over 800 million kg have been exported. This is far higher than the 720 million kg in 2011 when the Centre imposed a ban on cotton yarn exports.
Besides, domestic support is helping spinning mills to run at 85-90 per cent capacity.
“In view of the brisk activity, consumption estimate of cotton may be raised by the Cotton Advisory Board,” said Ramani.
There is, however, one spot of bother. “The cloth market is yet to pick up,” said Ramani.
Source: Business Line