Mumbai, Aug. 31: While the textile industry is gearing up to meet the pent-up demand ahead of the ensuing festival season, viscose filament yarn (VFY) manufacturers are facing hard times to cope with a double whammy ' cheap Chinese imports on the one side and increasing input prices on the other.
Even the big players such as Indian Rayon & Industries are hit by these. They too are now finding it a tall order to circumvent squeezing margins as it is becoming increasingly difficult to pass on the rising input costs to customers due to competition from bargain imports from China and other South Asian countries.
Viscose filament yarn, which is made from rayon grade wood pulp, is used for making saris, apparel and upholstery. India ranks second only to China in production of this yarn globally.
China produces over 2.35 lakh tonnes of the filament annually and its consumption there is around 1.45 lakh tonnes. In India, the VFY production capacity is far lower at 54,000 tonnes per annum.
“It is the surplus capacity of China that has led to increasing exports to India,” said industry experts. The domestic manufacturers are crying foul that not only China is dumping the yarn here, but under-invoicing is also widely practised.
The net impact is: both realisation and margins in the industry have been falling.
“Moreover, inventories are also piling up,” rues a leading manufacturer. “While the normal stock level in the industry used to be less than 30 days, the inventory level now stands at over 55 days due to competition from cheap Chinese imports,” he explained.
Sources said some varieties of the imported yarn come at a price as low as Rs 185 a kg compared with Rs 205 per kg offered by the Indian manufacturers.