Decline in crude oil prices and sluggish demand have hit the entire cotton value chain, leaving stakeholders complaining about cash crunch as money has been locked up in inventories and prompting yarn manufacturers to cut prices. The monthly yarn price declared at Tirupur has been cut by ?10 per kg.
“China is not buying much yarn. There is overcapacity in the market and the payment cycle has been affected,” said Nishant Asher, partner, RS Asher.
Export demand has reduced as Indian cotton has turned more expensive than that in the international market. Now, only mills are buying as per their requirement, said traders.
“Flow of cash is a problem all over the cycle. Cotton demand is less across the world while funds have been tied up in inventories,” said G Radhakrishnan, president, Coimbatore Cotton Association. With crude oil prices falling, polyester has become more attractive, adding to the sluggishness in cotton cycle. The impact has been felt even on cotton prices, which declined in the past few weeks. “There is not much demand for cotton. Prices have also declined,” said Pradeep Jain, president, Khandesh Ginnners Association.