Chinese share of Indian yarn exports more than double in FY24
Cotton yarn exports rose by 83 per cent in FY24. The share of yarn exports rose 32 per cent of India's total production in FY24 against 19 per cent in FY2023. The growth mainly came from China, which has been facing allegations of forced labour in the production of Xinjiang cotton. Since January 2023, post lifting of the Covid-related restrictions in China, concerns on the use of Xinjiang cotton have been on the rise in the global apparel market. This led to increased sourcing of yarn from India. Share of exports to China rose to 21 per cent in FY24 against 10 per cent in FY23. Bangladesh, China, and Vietnam collectively account for 60 per cent of Indian cotton yarn exports.
Further, domestic cotton fibre prices, after witnessing record-high levels in H1 FY2023, fell gradually in H2 FY2023. In FY2024, cotton fibre prices declined by 25 per cent in comparison to the average cotton prices in FY2023 amidst weak demand in the domestic market, as per ICRA.
Though the cotton fibre production for 2024 is estimated to fall by 6 per cent due to reduction in sown area amid uneven rainfall, carry-over surplus of cotton to support consumption in the year and this is expected to keep prices stable. In the last fiscal, the overall cotton yarn production was higher by 9 per cent and the domestic market, which consumes 70 per cent of the produce, was subdued and this has supported the healthy carry-over surplus.
No major impact was witnessed in cotton yarn exports due to the Red Sea conflicts as the shipments mainly go to Bangladesh, China, and Vietnam. Sustained continuance of the conflict would, however, have a direct impact on apparel export volumes and a consequent impact on cotton yarn export volumes and realisations.
Domestic spinners are likely to report a volume growth of 4-6 per cent in FY2025 primarily through increase in export volumes to Bangladesh and China owing to competitive yarn prices and muted recovery in domestic demand.