India apparel exports volume may shrink as prices soar

Thursday, 3 March 2011 01:01 - - {{hitsCtrl.values.hits}}

* Demand from developed countries hit by high prices

* Cotton touches new highs in Feb., more rises in sight

* Govt capped yarn exports but move not enough - AEPC

MUMBAI (Reuters) - Soaring cotton prices are likely to crimp India’s apparel exports * y at least 15 percent in volume terms this year, as they shrivel demand from developed economies that are still limping into recovery, an industry body said.

Buyers are increasingly deferring orders or cutting volume in the hope of some respite in prices, Premal Udani, chairman, Apparel Exports Promotions Council (AEPC).

“Overall raw material is getting expensive and it is going to impact the consumption pattern,” he said on Tuesday.

While high prices could mean that apparel exports actually rise in value terms, apparel makers in India are struggling to retain export orders as global cotton prices test unprecedented levels over the last six to seven months, Udani said.

U.S. cotton futures early this month rallied to a record high of $2.0402/lb. [ID:nL3E7DH04J]

“Right now, at these prices, I can tell you nothing is looking bright in the international markets,” Rajesh Mandawewala, managing director of Welspun Group (WLSP.BO) told reporters.

“Those economies are still recovering, they are still struggling. So, demand is not as much as it used to be in 2007,” Mandawewala said, referring to the U.S. and Europe. He said he saw rising incidences of orders getting postponed.

“It’s anyway becoming very, very difficult, at current prices, to make exports happen and make profits. In 2011/12 also export increase will come from prices, not volumes,” he added.

In India, the world’s second biggest producer and exporter of the fibre, prices of the most common Shankar-6 variety hit a record high of Rs.60, 000 per candy of 356 kg early this month. The price has more than doubled in the past year.

Cotton prices are unlikely to fall sharply from current levels as deliveries at local markets, known as arrivals, are indicating production will be less than projected, D.K. Nair, secretary general at the Confederation of Indian Textile Industries, told Reuters.