Textile mills hike yarn prices as cotton shoots up

COIMBATORE: Yarn prices, hovering around their peaks, were still not able to keep pace with the rising cotton prices. Textile mills in the Coimbatore region have hiked yarn prices by Rs 15 per kg - second hike in February. "Even the latest increase (in yarn rates) is not matching the hike in cotton prices," said P Nataraj, managing director of KPR Mill.
That's because cotton prices have jumped at a much faster pace than yarn rates. The popular Shankar-6 cotton have jumped 10.7% since February 7, but yarn rates for the widely-used 40s count have moved by only 5.7%.
Prices of Shankar-6 have spurted 50% since September 2010 to Rs 58,500 per candy (356 kg) but rates of the 40s count, which were keeping pace with the cotton prices initially, have increased 39.5% to Rs 275 per kg on February 23. Yarn accounts for nearly 60% of the costs for garment makers, who have said that it is difficult to operate if prices are increased frequently.
For every 100 kg of cotton, 75 kg of combed yarn and 85 kg of carded yarn can be produced. "For every Rs 1000 (per candy) increase in cotton prices, we have to increase yarn rates by Rs 4 per kg," a source in textile mills said. "If cotton prices stay close to the Rs 60,000 level, we would have to increase yarn rates further," he said.
The exporters are also feeling the pinch. "We would not be able to get orders at the current yarn rates. Buyers are not willing to pay more," said A Sakthivel, president of Tirupur Exporters' Association. Garment makers have already committed orders setting Rs 240 per kg as the benchmark and would not be able to absorb the increased costs, Sakthivel said.
With the Madras High Court ordering the closure of polluting units in Tirupur, there wouldn't be much yarn offtake, industry officials said. "Even if we buy yarn we are not in a position to knit as the dyeing units are closed. So, there wouldn't be any significant demand for yarn now," said M P Muthurathinam, president, Tirupur Exporters andManufacturers Association.
(Source: http://timesofindia.indiatimes.com/business/india-business/Textile-mills-hike-yarn-prices-as-cotton-shoots-up/articleshow/7566289.cms)