Will China's Massive Cotton Yarn Order Revive India's Textile Industry?

Xinjiang province in China produces over 70% of the country’s total cotton production. However, the province has faced lower cotton crop production in 2023, resulting in China placing a large order for cotton yarn from India. China’s recent order of nearly 5,000 tons of cotton yarn from India has sent ripples across the textile industry. Here’s what you need to know:

Impact On India

• Production Boost- The latest order from China is expected to boost the Gujarat-based spinning mills, which were undergoing idling due to low demand. The state’s spinning mills are expected to fulfil most of the orders within the next two months.

• Price & Export Demand- Indian cotton prices have remained higher than international prices for almost a year, leading to a drop in cotton yarn exports. The recent order from China is expected to reverse this trend and improve the country’s export demand.

Market Outlook

According to industry estimates, India’s cotton production in 2023 will be around 34 million bales. Cotton rates are estimated to be around Rs 55,000 per candy level. Additionally, yarn rates are estimated to fall to Rs 245 per kg from Rs 255 per kg (current price). This drop in yarn prices is expected to lead to increased export demand for India as prices become more aligned with international rates.

OFB’s Insight

China’s recent order of cotton yarn from India is a positive development for the textile industry, which was experiencing a slump due to low demand. This order is expected to provide a much-needed boost to the spinning mills in Gujarat and improve the country’s export demand. With the predicted drop in yarn prices, India is likely to witness a surge in export demand, leading to a much-needed revival of the textile industry.