CHINA’S NEW POLICY COULD SLOWDOWN INDIA, PAKISTAN
"Domestic production in Pakistan and Bangladesh will not be able to keep pace with the increasing demand for apparels in these two countries, providing opportunities for Indian exporters. Quality will be the most important factor apart from the rupee’s value for India’s exports as other countries like Australia, Uzbekistan and Turkey will also be selling to Vietnam, Pakistan and Bangladesh."
Despite China’s significant reduction inimports and moderate demand from the Indian spinning industry, yarn prices are likely to remain at the current level. However, Indian and Pakistani players are worried. The cotton sector outlook released recently by India Ratings and Research (Ind-Ra), had said cotton sector is likely to revive moderately in 2016-17 season (August-July) as exports to Vietnam, Pakistan and Bangladesh may be higher than a year ago. Vietnam is likely to increase its spindles capacity by 30 per cent in FY16-17.
Domestic production in Pakistan and Bangladesh will not be able to keep pace with the increasing demand for apparels in these two countries, providing opportunities for Indian exporters. Quality will be the most important factor apart from the rupee’s value for India’s exports as other countries like Australia, Uzbekistan and Turkey will also be selling to Vietnam, Pakistan and Bangladesh.
Meanwhile, in April, China’s new policy is going to be announced that is critical to global trade dynamics and perceived pricing has put a lot of downward pressure on yarn prices. Speculation is rife that initially it will increase prices and gradually it should plummet beyond the initial phase.
At the just concluded Yarn Expo being held simultaneously with Intertextile Shanghai global yarn manufactures put their perspective on yarn pricing.
Higher tariffs, lower prices a dampener
Chinas new policy could slowdown India Pakistan cotton sector3jpg
JP Jain, VP-Marketing, TT, an exhibitor at Yarn Expo believes in short run price is likely to go down “Buyers, especially traders are inactive and holding their breath as Chinese cotton policy is expected soon and it could be a game changer for global trade dynamics. Hence, Chinese buyers are asking for lower prices such that Indian spinners have already reached a flash point, losing anything between Rs 10-12 per kg.”He feels, the China’s cotton policy will bring down already distressed prices. However, China will continue to remain a big factor especially for India, since China continues to import anything between 30 to 40 per cent of cotton yarn. If China keeps buying, it will add stability to supply demand dynamics. “Also there is a new development where many are shifting to compact yarn instead of normal.Moreover, stop gap exports to Pakistan through Wagah border has given a fillip to north Indian exporters, especially those in above 24s count. For above 24s count, good opportunities are emerging in Uzbekistan, Indonesia and Vietnam etc.”
UjwalLahoti, Vice Chairman, Texprocil feels, Indian exporters are losing out because of tariff which is 8-10 per cent more than neighbouring countries, while they pay zero tax. “Pakistan exporters for example, have factually higher cost of production compared to us. Yet they end up doing better because of favorable tariff structure. Trade balance between India and China is in favour of China.”He says,Texprocil has already flagged the issue to government. “At APTA (Asia Pacific Trade Association) level many recommendations have been made and government is tryingto get at least 50 per cent concession in existing levelsfor a level playing field. Indian government will also need to push it to China for 10 ‘HS Code lines’ to APTA for reduction.”
Texprocil’s ED Siddhartha Rajagopal, says they are making a strong pitch for better market access to fibre exporters and attract higher investment and generate more job opportunities. Also the industry needs to go for value addition taking a cognizance of the fact that China is losing competitiveness. “In 5-10 years, Indian industry needs to ramp up to close in the competition gap. It’s where initiatives like ‘Make In India’ can support,” he added.Meanwhile India needs to create a conduciveenvironment for building capacity and seize market share. Tirupur has created maximum number of jobs lately across sectors validating the immense potential this sector offers.
Pakistan too on thin ground
Rizwan Khan, MD-Gul Ahmed points out it’s an undeclared global recession and the world has to emerge from this situation. “Moreover, China’s focus on domestic market is discouraging yarn imports leading to falling cotton prices. The new Chinese cotton policy can only add fuel to fire as it is likely to use stocks and reserves of 2010-2011 onward. And since China consumes 50 per cent of global cotton it will create a ripple effect globally.”
Khan,feels factors such as local sales, flagging, exports, challenges and excess supply will have a catastrophic impacton Pakistan’s yarn sector. “The answer to the situation is value addition for Pakistan in dyed yarns, dyed yarn fabrics, garmenting, home furnishing as well as diversification to non-traditional markets etc. Also, there is a great dissension amongst Pakistan industry due to the imports deluge which is killing domestic industry. Oflate, Bangladesh has taken business away from Pakistan in knitting. Besides, raw grey yarn sale is deeply disturbed in Pakistan,” he summed up.
