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Weak rupee, high petroleum prices to hit textile industry.

The impact of rupee depreciation and higher petroleum prices is now being felt by the textile industry, as fabric and apparel makers remain hesitant to pass on higher costs to the final consumers on concerns over weak demand, raising questions on how the industry will cope with this challenge.

While the prices of petro-based raw materials such as PTA and MEG have gone up by close to 44% in the past three years, the rise in fibre, yarn and textile prices has remained between 12% and 35%.

Prices have been going up steadily over the past few years, but not enough, argue upstream players facing the direct brunt of rising petroleum prices and a weak local currency.

The industry's energy cost has almost doubled -- fuel prices have increased by around 40%, packaging cost has increased by almost 30% and labour cost has also increased steeply in the past couple of years.

The sudden spike in raw material costs has rocked the boat for downstream players, who have managed to pass on the gradual increase in cost earlier, said Rahul Mehta, president, clothing, Manufacturers Association of India (CMAI).

According to him, a rising number of consumers are buying their requirements during the end-of-season discount sale, and it would be too risky to increase prices at this stage. Yet, a few are ready to accept the ground realities, notwithstanding the obvious risks, on expectation of an improved demand in the upcoming festive and marriage season.

According to him, the fabric processing units around Surat region are demanding a 15%-20% price-hike in their dyeing and printing operations with immediate effect for grey fabric traders, but are unable to secure it due to a drop in volumes.

Since much of the buying of textiles and apparel manufacturers for the upcoming festive season was done before prices were raised, the industry won't be impacted in the near term. The impact will be felt in the summer 2014 season, CMAI's Mehta said.

The rise in cost structure of man-made fibres and the textiles value chain is, however, not causing a shift to cotton, as prices there too have gone up. However, demand from overseas has helped local manufacturers.

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Publication:Pakistan Textile Journal
Geographic Code:9PAKI
Date:Oct 31, 2013
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