There's unsold inventory of yarn and is only rising in China. Some mills are cutting production too. The reason could be an increase in capacity of spinning mills or faltering demand for cotton yarn in global and domestic markets. The fact remains that surplus yarn is waiting to be sold. Moreover, domestic consumption has been subdued. April, May and June together saw a 7 per cent year-on-year growth. The global markets, meanwhile, is becoming competitive.

India is doing well though, analysts say yarn exports in August were 26 per cent higher y-o-y and for the period between April and August, was 7 per higher than a year ago. However, when viewed against several variables that have a bearing on world trade, the situation is more complicated. For instance, last year, yarn mills added capacity in anticipation of good prospects on home ground, following a pick-up in demand for textiles. China too decided to import more yarn than cotton as conversion costs were increasing there.

A yarn stock of 157 million kg, which is relatively high as indicated by June figures and stocks have been at these levels since October. If they hit the last peak levels of about 200 million kg, which was the case in 2011, it would be detrimental to domestic mills. Chinese imports in cotton too have dipped, while Brazil and Uzbekistan actually increased exports of cotton to China during 2014-15. This was according to a report by Edelweiss Research, which stated trade flows saw a shift among nations during the season.

However, there’s no contraction in yarn exports yet and only the pace of growth is lower. if demand on domestic or exports improves things would look up to justify the higher spindleage in the country.