India spinning mills have been advised by the Indian Texpreneurs Federation to reduce yarn production 35 percent for two months to minimize losses and stabilize cotton and yarn prices.
Yarn prices are down in India due to a supply and demand imbalance and the current price disparity of yarn and cotton has resulted in severe losses for standalone spinning mills, ITF secretary Prabhu Dhamodharan said.
Mills in Tamil Nadu, a big player in textile manufacturing, consume more than 30 percent of cotton and synthetic fibers, and a slowdown in production for the next 60 days will stabilize yarn prices by reducing the market supply, Dhamodharan said.
Reducing cotton consumption will also lower cotton prices to a realistic level in the next season, he added.
[Read more about global cotton consumption: Global Cotton Output Seen Rising Amid Demand Fluctuation and Weather Woes]
ITF has also advised the mills to retain the workforce and pay wages even without regular work, and engage them in annual maintenance activities and impart new training to improve productivity.
It is unclear whether mills tend to take action on ITF advisories or whether market conditions and internal company decisions prevail.
ITF took the decision after a study that found that many industries, including cement and steel, are optimizing their production levels based on market intelligence and minimizing the impact of their bottom line during the downturn in demand.
India is one of the sixth-largest yarn suppliers to the U.S., with $50.71 million worth of goods imported in the first six months of this year, a 5.2% increase for the same period a year earlier.
In the U.S., cotton prices averaged 72.63 cents per pound for the week ending September 7, up from 69.05 from the previous week and 67.6 cents reported the corresponding period a year earlier. In India, raw cotton prices last month held steady at 85 cents pounds.