December 10, 2012 / 10:41 AM / 7 years ago

India's cotton yarn exports seen rising 20 pct on Chinese demand

* China to cut cotton imports, to focus on manmade fibres

* Traders apprehend curbs on yarn exports from India

By Deepak Sharma

MUMBAI, Dec 10 (Reuters) - India’s exports of cotton yarn are expected to rise a fifth in the fiscal year to next March, spurred by higher imports by top consumer China and a weaker rupee currency, traders said on Monday.

Exports of yarn, a value-added product used by textile mills, are expected to touch 992 million kg in the fiscal year ending next March.

But overseas sales of raw cotton are likely to fall to 7 million bales (of 170 kg each), down 45.7 percent on the year ending on Sept. 30 2013, they said.

China, India’s biggest buyer of cotton in the marketing year to Sept. 30, when New Delhi shipped out a record 12.9 million bales, is gradually shifting to man-made fibres such as polyester.

By doing this China aims to avoid supply disruptions from cotton manufacturers such as India, which often reins in exports to avert shortages at home, said Sushil Agrawal, who owns a large yarn manufacturing unit in the northern state of Haryana.

In October, raw cotton shipments from India to China fell by 98 percent, while yarn export registration jumped more than 100 percent to about 9.4 million kg, government data showed.

“Cotton yarn export registrations rose by over 20 percent so far in the current fiscal (year) and we expect this trend to continue until March. And yarn shipments could go up by at least 20 percent this fiscal,” said the chief financial officer of a Mumbai-based textile firm, who did not want to be identified because he is not authorised to speak to the media.

Cheap labour, surplus cotton and a fall in the rupee have made it attractive for India to ship more yarn, said D. K. Nair, secretary of the Confederation of Indian Textile Industry (CITI).

On Friday, the rupee fell 11.6 percent against the dollar to end at 54.47 rupees, from its Feb. 6 level of 48.16 rupees.

Annual yarn manufacturing capacity in India, Asia’s third-largest economy, is around 3.6 billion kg.

The state-run Cotton Advisory Board (CAB) estimates there will be exportable surplus of 920 million kg, or 20 to 22 percent of total output, in the fiscal year that ends in March 2013. Traders and millers expect yarn exports to touch 992 million kg.

But some traders fear the government could curb yarn exports if a sharp rise in shipments results in any shortage.

“We have asked the government not to intervene and let the market forces decide on the direction of cotton and yarn exports,” said Nair of CITI.

Currently traders are shipping yarn at $4 per kg, free-on- board, higher than $3 per kg, a year earlier.

Aggressive local purchases for export have lent some support to domestic cotton prices, preventing them from falling sharply despite rising supplies from the new season crop.

Also, demand for raw cotton has been lukewarm on lower global cotton prices. Benchmark New York prices have fallen around 25 percent from the year high reached on Jan.23.

By 0952 GMT, the contract was trading up marginally, at 73.82 cents per lb. (Editing by Mayank Bhardwaj and Clarence Fernandez)

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