Clothing Industry Turmoil to Cut Cotton Grower India’s Sales

India is set to cut exports of the fiber as the coronavirus pandemic roils demand for clothing across the world.

Clothing Industry Turmoil to Cut Cotton Grower India’s Sales
Cotton bolls grow on a plant in a field in India. (Photographer: Prashanth Vishwanathan/Bloomberg)

(Bloomberg) -- Major cotton grower India is set to cut exports of the fiber as the coronavirus pandemic roils demand for clothing across the world.

India’s cotton shipments will probably be about 3.5 million bales in 2019-20, about 700,000 bales of 170 kilograms lower than the industry target, said Vinay Kotak, a director of Kotak Commodity Services Pvt., one of India’s biggest cotton exporters. Inquiries from buyers including China have dried up, he said.

India’s cotton industry, which was set to become the world’s biggest this year, is among many within the clothing supply chain that have been thwarted into crisis by the virus-led lockdowns from Europe to Asia to the U.S. Not only have garment factories closed in producers like Bangladesh, but empty streets from New York to Paris have decimated consumption of clothes.

“Cotton exports from India right now have been completely ruled out as there’s no demand right now,” said Arun Sekhsaria, managing director of DD Cotton. “Most of China’s textile export orders to the U.S. and Europe have been deferred, canceled or put on hold. Who is going to buy Indian cotton now?”

Spinning mills in China, Indonesia, Vietnam and Bangladesh are working at 30% to 40% of their capacity right now, Sekhsaria said.

Cotton prices in New York, which traded at about 56 cents a pound, could slump to 45 cents as “no one is thinking about clothing right now,” Sid Love, president of Sid Love Consulting Services in Overland Park, Kansas, said earlier this month.

Still, as prices have also tumbled in India, that may help increase its competitiveness for spinning mills that are still operating, said Atul Ganatra, president of the Cotton Association of India.

Also, as much as 3.1 million bales of the fiber have already been exported out of 3.4 million bales contracted so far in 2019-20, so Ganatra is optimistic that the 4.2 million-bale export target for the year ending Sept. 30 could be achieved. With China starting to reopen its factories, he’s hopeful that India will soon see orders.

Indian cotton prices are hovering around 37,000 rupees per candy (785 pounds) in the domestic market while in the U.S., the free-on-board price is 39,500 rupees, according to Ganatra. “This is an attractive price for exports,” he said.

For demand within India, Ganatra forecasts consumption to fall to 30.5 million bales in 2019-20, lower than the association’s estimate of 33.1 million bales. Only 30% of the country’s spinning mills are operating now and some are awaiting government permission to restart, he said.

On Indian imports, shipments will be lower than expected this year because domestic cotton is cheaper while a weaker rupee is making overseas purchases more expensive, Ganatra said. Inbound shipments may be about 1.8 million to 2 million bales, of which about 1.2 million bales have already been bought, he said.

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