India feels pressure as ICE cotton declines, short supply to persist

ICE Cotton July 2022 contract declined by 27.67 per cent during last week. Other contracts also fell up to 18 per cent. According to market experts, free fall on Friday was due to sell-off by speculators. According to an analysis by the Confederation of Indian Textile Industry (CITI), the gap between Indian and ICE cotton has widened due to a sharp fall in the American market. On Friday, the price difference of MCX June contract and ICE July contract was 47.30 cents per pound. MCX cotton was costlier by 17.26 cents a pound against ICE cotton.

This week, ICE cotton October 2022 contract further declined to 100.06 cents a pound on Tuesday. The December contract fell to 94.12 cents a pound. Therefore, ICE cotton October contract when converted to Indian currency was at around ₹62,000 per candy of 356 kg. In comparison, the price of India’s benchmark Shankar-6 cotton variety is currently ruling at ₹88,000-97,000 per candy in the spot market of Gujarat. In north India, the price of cotton is between ₹84,000 to ₹92,000 per candy depending on the quality.

Chetan Bhojani, a Gujarat-based trader told Fibre2Fashion, “Indian cotton prices for October 2022 and later delivery are likely to feel pressure. But the prices may not see steep fall for spot and next 2-3 months delivery deals. June, July and August contracts of MCX cotton have seen upside trend in last few trading sessions, which shows good demand for the next few months.”

According to Bhojani, while spinning mills will need cotton for regular consumption, there will be no supply of new cotton in the country till September. The supply of summer crop is also expected to be very meagre.

The Indian government tried to give relief to the industry by removing the import duty, but it did not result in providing the much-needed relief from costlier cotton. According to trade sources, around five lakh bales of cotton was contracted for import after duty removal. Most of the import deals were done by south India based mills at around ₹90,000-100,000 per candy, which is much higher than the current price. The mills are getting supplies of imported cotton when domestic prices are easing now.

According to Fibre2Fashion’s market insight tool TexPro, India imported 3.24 lakh MT fibre valued at $806 million during October 2021-March 2022. Monthly import noted at 48,760 MT in March, 42,007 MT in February, 52,254 MT in January 2022, 70,979 MT in December, 58,412 MT in November and 51,949 MT in October 2021.

ALCHEMPro News Desk (KUL)