FW: Textile firms rush to complete year's cotton buying

 

 

Textile firms rush to complete year's cotton buying

Chandan Kishore Kant / Mumbai October 1, 2010, 2:53 IST

A mid uncertainty on cotton export and anticipation of further price rise, textile majors are thinking of doing all or the bulk of their procurement during the initial part of the season.

The Indian cotton year, which runs from October to September, begins today. Companies say they would prefer not to procure on a month-to-month basis. R K Dalmia, president of Century Textiles and Industries, part of the B K Birla group, told Business Standard, “We will buy cotton in the first few months only, as prices are likely to go further up and there are concerns on quality of the crop.”

Industry leaders at the recent annual general meeting of Confederation of Indian Textile Industry said mills had no cotton stocks. There are also reports that quality has suffered due to excessive rain in Punjab and Haryana.

According to Sunil Khandelwal, chief financial officer of Alok Industries, "Globally, there are supply constraints as the crop in China and Pakistan has suffered. Prices in the domestic market move with the international prices, which are rising.” Alok would, he said, finish cotton procurement for the main season during November-February.

The CFO of Arvind Ltd, chose not to disclose the buying plan but said, "There is a general caution on cotton prices presently."

Normally, the new crop starts arriving by the first week of October. This year, say industry players, arrival would get delayed by a month. “We expect cotton arrival this year to be around the last week of October or first week of November,” said Dalmia.The price of the Shankar-6 variety is Rs 38,000 a candy (a candy is 356 kg). The country is expecting an over all production of 29.2 million bales against 29 million bales last year.

 

 

 

 

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Why Arvind Wants To Put Up A Plant In Bangladesh

Arvind , the largest denim company in India with a capacity of about 110 million mtrs , is planning to set up a manufacturing plant in Bangladesh in a 80:20 joint venture with Nitol Group of Bangladesh . The planned investment is about $69 million over a period of three years. In the first phase, a plant of 10 million mtrs would be set up with an investment of about $25 million and then it will be scaled up in the coming years.

Why Arvind Wants To Put Up  A Plant In Bangladesh ?

There are just too many reasons to justify this move by Arvind. In fact , there could not be a better place  for Arvind to go for to set up a new plant for denim.

• It is a Huge Market and consumes almost around 300 million mtrs of denim p.a out which about 100 million mtrs is imported . We have seen a number of new denim plants been set up in Bangladesh in the last few years and this has taken the domestic production capacity up to 200 million mtrs.
• Bangladesh enjoys the GSP benefit to the EU ie the garment exports from Bangladesh to EU are duty free . This provides a huge benefit to the local industry in Bangladesh – a benefit Arvind aims to tap.
• Bangladesh was the top export performer in the EU market in 2009 with a 6% growth whereas most of other countries suffered a fall in exports to EU to global recession. Bangladesh exported a total of Euro 5.9 billion worth of goods (over 90% were garments) to EU.
• Bangladesh exported a total of about 89.6 million pieces of jeans to EU in 2009 against only 8.1 million pieces from  India .

There are significant cost advantages in Bangladesh as compared to India. These relate to labour  costs, power costs and cost savings due to efficiencies of scale. Eg, the power cost in the Comilla Export Processing zone  ,where Arvind will set up its plant , is about Taka 4.18 /kwh which translates to about Rupess 2.69 (about 6 cents) . Compare this with the cost of power that Arvind is currently incurring– Rs 3.8/kwh at Naroda plant and Rs 4.7/kwh at its Santej plant (about 8.5 to 10.5 cents/kwh). There will thus be a saving of about 30% in power costs alone. The labour, overheads and freight costs would be some of the  other categories where Arvind would save substantial costs.
The lower costs in Bangladesh are one of the reasons why the average price of export of Denim Apparel from Bangladesh was  Euro 4.17 in 2009 as compared to Euro 9.46 from India . The difference is Huge ! .  In all likelihood, Arvind will go for a forward integration for export of garments from Bangladesh and aim to utilize all its fabric for own orders. This will mulitiply the gains accruing to it .
All the above mentioned factors and more have contributed to Bangladesh becoming a favourite destination for denim garment exporters and encouraging the denim major Arvind to set up base there

India can export 75-80 lac bales cotton this year: Pawar

India can export 75-80 lac bales cotton this year: Pawar

Press Trust of India / New Delhi September 29, 2010, 15:52 IST

The government has fixed a cap of 55 lakh bales on cotton exports for the 2010-11 but Agriculture Minister Sharad Pawar has said that there is a scope for increasing it to 75-80 lakh bales.

"The cotton crop is extremely good this year. We can export upto 75-80 lakh bales, which is not agreeable to my other colleagues," Pawar said yesterday after a meeting of senior ministers, where 55 lakh bales limit was endorsed for 2010-11 marketing season (October-September).

He said a review will be taken by the December-end, adding that the government needs to take a balanced view to protect cotton growers as well as the industry.
    
"Currently, international prices are good. This is the golden opportunity for farmers and they will get better prices," he said.
    
One bale contains 170 kgs of cotton.
    
Last week, Pawar had said that "the Textile industry is making noise," as it does not want exports to be allowed during the peak harvesting period, October to December.
     
The booking of cotton exports will begin from October 1 and the shipment would take place from November onwards.
     
According to the estimates of the Agriculture Ministry, cotton production is projected at 335 lakh bales for 2010-11 marketing season, against 239.35 lakh bales last season.
    
The demand from domestic industry is projected at 220 lakh bales.
    
Up to 55 lakh bales, the exports will be duty-free and the government is yet to decide whether to allow excess exports with any levy. However, the industry has been demanding imposition of the export duty of Rs 10,000 per tonne fearing that exports would pressure on the domestic prices in the new marketing season.
    
Cotton prices remained quiet firm in the 2009-10 season touching nearly Rs 40,000 a candy of 336 kg, against Rs 23,000 a candy last year.

CITI happy with decision to defer cotton exports

CITI happy with decision to defer cotton exports

BS Reporter / Mumbai/ Ahmedabad September 30, 2010, 0:47 IST

The Confederation of Indian Textile Industry (CITI) has welcomed the decision of central government to defer export of cotton from the new crop by a month to November 1, 2010.

In an official statement, Shishir Jaipuria, chairman, CITI, also welcomed the reiteration that exports would be restricted to the exportable surplus of 55 lakh bales. “We thank the minister of Textiles, Dayanidhi Maran, for resisting the attempts of cotton traders and the Agriculture ministry to overestimate exportable surplus and to commence exports immediately. The estimates of global crop are gradually coming down with the unraveling of the problems that cotton production has faced this year in Pakistan and China,” Jaipuria stated.

He said that similar uncertainties were present around India's crop because of excessive rains in certain areas and therefore the approach to cotton exports should be cautious, especially until firm crop estimates and a clearer picture of the increasing cotton consumption in the country are available.

However, the textile industry body is of the opinion that November 1 will be too early to permit cotton exports and that they should be deferred up to January 1, 2011 by which time a clearer picture of the cotton scenario of the season would be available.

“The industry is prepared to pay international cotton prices to Indian farmers and exports should be restricted to the quantity for which the industry was not able to offer international prices to Indian farmers. The interests of farmers are of primary importance and the industry only wanted to curtail speculation in the domestic market,” Jaipuria added.

Apparently, the announcement of exports from November 1 has already resulted in an increase of more than Rs 500 a candy in cotton prices in the country as a reflection of the market sentiments. “Currently cotton prices in India are significantly higher than international prices and the situation will only worsen in the coming months unless a firm announcement is made that exports would be monitored closely and restricted to exportable surplus,” said Jaipuria.

Meanwhile, countries like China, Pakistan and Bangladesh are scouting for cotton at present with their respective governments going out of their way to procure Indian cotton and supply it to their mills at lower prices through visible and invisible internal subsidies.

“Unless our government takes effective steps to ensure cotton security for Indian mills by providing affordable access to our own cotton, without hasty exports, the textile value chain of the country from yarn to garments and made ups and the over 35 million workers employed by them will be hit irreparably”, Jaipuria stated.

Raw cotton exports to resume from Nov 1

he Government of India has now decided to permit exports of raw cotton from November 1, instead of the earlier decision to resume them from October 1, 2010.

This was divulged by the Textile Secretary, Ms Rita Menon, who said that the Group of Ministers (GoM) decided to permit exports of up to 5.5 million bales from November 1.

However, she added by saying that, registrations of export contracts will begin from October 1, as was decided earlier.

The GoM had a tight rope walk, as it was under intense pressure from both the extreme ends of the textile value-added chain, the cotton exporters as well as spinners and clothing exporters.

The GoM also decided not to levy any regulatory duty on exports of the 5.5 million bales; however it will be up for review on October 15, depending on the crop estimates that would be available by then.