Domestic demand to lead cotton yarn growth, exports to pull down growth
CRISIL Research expects the demand for cotton yarn to grow at an overall CAGR of 4.4 per cent, from 2,897 million kgs in 2008-09 to 3,599 million kgs in 2013-14. This growth rate is slower than the 6.4 per cent CAGR recorded between 2003-04 and 2008-09.
Exports of apparel and made-ups are expected to grow at a slower pace than in the previous years, given the slowdown in the US and EU markets, and the severe competition from China, Vietnam and Bangladesh. Consequently, derived demand (yarn used for manufacturing fabric used in garments and made-ups that are exported) will also exhibit a lower growth trend.
While the domestic textiles industry will remain the key driver, cotton yarn is expected to face substitution from polyester filament yarn (PFY), which is cheaper and finds usage in low-priced synthetic fabric. Direct yarn exports too are expected to grow slowly on account of falling consumption in the EU-27 countries and Japan, and also due to declining made-up exports of yarn importing countries like South Korea and Turkey to the US and the EU, respectively.
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