Indian cotton spinners’ profitability as well as revenues are expected to have moderated sequentially in the third quarter. So says Icra.

Contribution levels for the spinners in fiscal year 2023 were hit by steeper increase in cotton prices with all-time high levels reported in May 2022. Besides, the demand was impacted by the resistance from downstream companies to such high prices, uncompetitive Indian yarn prices in the international market and a slowdown in demand from developed nations amid recessionary concerns.

Icra expects volumes as well as contribution levels to improve from the fourth quarter onwards on the back of some recovery in demand and lower cotton prices with new arrivals.While cotton yarn prices moderated by 25 per cent to 30 per cent in the past four months from the peak levels reported in May 2022, with demand coming down and tapering of cotton fiber prices, these continue to be about ten per cent to 20 per cent higher than the past five-year average.

A continued correction in yarn prices is expected in the coming months, with a gradual softening of commodity prices and intermittent demand disruptions across the textile value chain.On the export front, after registering all-time highs in fiscal year 2022, Indian cotton yarn exports have been declining sharply since April 2022.