Currently, India’s cotton yarn exports are under intense pressure due to high prices. As per CCF Group, this pressure can ease if Pakistan allows traders to import cotton yarn from India. Participants along the textile industrial line have requested the Pakistan government to allow cotton yarn imports from India as high consumption rates and transfer of orders have tightened supply chains in the country. Apparel exporters argue, increase in raw material costs is also leading to a delay in delivery of overseas orders.
Cotton gains with high consumption, geographical proximity
Till the second half of 2019, India-Pakistan had close trade relations. Pakistan was the major export destination for Indian cotton
yarn with India exporting around 4.62 per cent or 24.5kt of cotton yarn to Pakistan. India’s cotton exports to Pakistan increased every year from 2012-2019. From 7kt in 2012 it reached 68kt in 2018, accounting for 5.6 per cent of the country’s total cotton yarn exports. Its share in the Pakistan market reached its peak in 2017 when Indian cotton yarn had a 7.4 per cent share. Since 2016, Pakistan has also been one of the top three export destinations for India and the country depends on Pakistan due to its favorable consumption capacity, and geographical proximity.
Reopening and its impact on cotton market
Supported by a surge in raw material and downstream demand, prices of Indian cotton yarn increased after the Chinese Spring festival. This, despite ICE cotton futures plummeting and a decline in May contracts. The operating rate of Indian local spinners remained high with inventories averaging at less than one week, says the CCF Group report. Most spinners pre-sold their March and April orders pushing traders to maintain high prices despite stocks in hand. By March 5, no Indian cotton yarn producer had reduced prices to adjust to the volatile downward cotton price. This uncertainty in trade environment masks commodity and price trends in India. If trade with Pakistan is allowed, it will boost India’s cotton yarn exports and support its prices.
