Indian cotton yarn prices are up 14% in the past two weeks on increased demand from China and higher seasonal domestic demand, according to Mumbai’s Business Standard.
Cotton demand normally peaks in March, with suppliers laying up stocks in the four months before it. That means traders and manufacturers are already preparing for the summer spike.
The price increase is a welcome reprieve for yarn makers, who have struggled during the past year with downturns due to shudders in the global economy. Cotton prices in India have been near production cost (sometimes slightly below) for over a year, prompting some government subsidies for farmers.
Traders and exporters hope steady buying from China and Bangladesh will keep prices up through the end of the year. China is the major market for Indian cotton, largely due to Chinese price fixing which sets the cost of China cotton 20 cents a pound higher than Indian cotton.
Additionally, rising wages in China mean that it is often cheaper to buy Indian yarn than to buy raw cotton and pay to spin it in China. This trend will continue, and is expected to produce a consistent increase in Indian yarn sales.
India cut off exports earlier this year before backtracking and imposing a cap that is periodically reviewed by the Cotton Advisory Board. Canceled contracts and uncertainty in international markets depressed cotton exports through the second quarter of the year, but they have recovered strongly.