Spinning units in India have decided to curtail yarn production and minimise losses. They have decided to move up the value chain by making value-added products instead of making only yarn.
The disparity between cotton and yarn prices has put the spinning sector in a tight spot especially due to the steep decline in price of yarn compared with the fiber cost. The spinning sector has to do this as in the textile manufacturing chain all others such as weaving, processing, apparels and home textiles optimise their utilisation levels based on demand, supply and order trends.
Reduced yarn supply will help match the demand. But if yarn supply needs to be curtailed, mills will have to go slow in consumption of cotton and this, in turn, will help bring down the cost of the fiber as well. This method is expected to help the mill sector reduce losses, besides bringing about a balance in cotton and yarn prices.
A number of standalone spinning units are cash-starved, considering that many varieties of yarn are now selling at levels well below the manufacturing cost. Mills have to formulate a sustainable and long-term formula instead of resorting to interventions every now and then.