Trends in cotton consumption and Perspective of Indian Textile Industry 2020

Transcription

1 Trends in cotton consumption and Perspective of Indian Textile Industry 2020 SPOswal CMD, Vardhman Group-India ICA Hongkong, 2 nd November, 2012

2 Importance of cotton to world textiles A reality check With growing application of textiles in various usages, the fiber consumption has been witnessing increased use of man made fibers including filaments yarns However, the study of fiber consumption, excluding filament yarns, over the years shows that cotton still occupies a prominent place If fibers used in non wovens and non-spun usages are also excluded, the dominance of cotton fiber in spinning system become evident The above facts indicate that despite strides made by man made fibers, the dominance of cotton fiber used in spinning remains unchanged 2

3 Even the overall fiber consumption excluding filament yarns reflects the importance of cotton (Million Tonnes ) Natural Fibre (P) Raw cotton Wool etc Sub-Total (a) Man made fiber WORLD FIBER CONSUMPTION Viscose PSF ASF Polymide-nylon Sub-Total (b) Total (a +b) % share of cotton in total fiber The above mentioned consumption of fiber includes those fibers also which are used in non-woven and technical textiles Source: The Fiber year GmbH, 2011 and projections by economic analysis department, Vardhman Group 3

4 If we take the consumption of fiber in the production of spun yarn, following picture emerges from the year 2000 onwards Composition of fiber in spun yarn production ( mn tons) 45 Other fibers Cotton Source: The Fiber year GmbH, 2011 and projections by economic analysis department, Vardhman Group 4

5 Higher share of cotton in total apparel imported in USA during confirms cotton dominance in apparel segment USA: Fiber wise clothing imports (% share) USA: fiber wise textile imports (% share) Cotton % share MMF% share Cotton MMF Source: Derived from trade data, Department of Commerce, USA 5

6 Regional pattern of global spinning capacity indicates regions, which will remain important for cotton processing in future Installed capacity of Short Staple Spindles by Region Region Installed Capacity (in million) % share in world capacity Asia Total Europe Western Europe Eastern Europe Other Europe South America North America Africa World The reduction in spinning capacity in some parts of the world indicates relocation of spinning capacity towards Asia in addition to setting up of additional capacity Source: ITMF 6

7 Within Asia, China, India and Pakistan accounts for 72% of spinning capacity in the world Installed capacity of Short Staple Spindles by Countries Mn spindles % share Countries China India Pakistan Indonesia Bangladesh Thailand Above 6 countries World Total Source: ITMF 7

8 Mn tons Percentage China*, India and Pakistan account for about 80% of world spun yarn production (37 mn tons) 37 World spun yarn production (2011) Others Indonesia Pakistan India China* China yarn production estimated based on fiber consumption Source: Textile Commissioner office, India APTMA Pakistan, The Fiber Year and other publications 8

9 Based on capacities and spun yarn production, Asia would continue to be major cotton consuming hub in the world Asia: Production and Consumption (mn tons) (proj) Production Consumption Production Consumption China India Pakistan Rest of Asia Asia-total World Asia as % to world Source: ICAC and projections by economic analysis deptt, Vardhman Group 9

10 Asian cotton deficit expected to increase by 2020 Asia: Cotton production, consumption and net import ( mn tons) Production Consumption Import Proj Source: ICAC and projections by economic analysis deptt, Vardhman Group 10

11 Future impact of price support operations of China and/india Govt China China reserve purchase at fixed price of 123 cents/pound Restrictive policy of import of cotton reflects its resolve to incentivize farmers Going by trends of increase in reserve price, we presume that by 2020, this will go upto cents/pound India Govt has followed minimum support price for variety of farm products including cotton Between , the minimum support price of cotton has increased at a CAGR of 7% Assuming the rate of increase is maintained in future, the Indian support price will reach upto cents/pound 11

12 Internationally, cotton price gradually will converge to China reserve price We have seen that Asia cotton deficit will rise from 37 mn tons to about 6 mn tons by 2020 China, India and Pakistan would account for about 70% of world cotton consumption India will have negligible surplus and China and Pakistan would be net importers of cotton Growth in world cotton consumption to 30 mn tons and limited scope for increase in world area under cotton crop will at best balance supply to demand In view of the tight balance in future between supply and demand of cotton and price support operations of countries having largest consumption of cotton, there will be a paradigm shift in factors/forces affecting the world cotton price Ruling prices in domestic markets of China and India will pull world price toward that level Virtually world price may show a clear tendency to converge to China reserve price over next few years 12

13 Indian Textile Industry: An overview Ω Indian textile industry has presence in complete textile value chain Ω India has 1940 large spinning and about 1333 small spinning mills having installed capacity of 48 mn spindles, which is about 20% of world installed capacity Ω In addition, there are about 08 mn rotors Ω The country has 22 mn powerlooms and about 50,000 shuttle less looms Ω A large number of knitting facility developed in clusters Ω India produces 4700 mn kg spun yarn and mn sqm of fabric Ω India exported US$34 bn textile and clothing products( ) 13

14 India: Cotton will have dominant share in all fibers consumption INDIA FIBER CONSUMPTION (MN TONS) (P) Raw cotton Wool etc SUB-TOTAL Man made fiber Viscose PSF ASF PP SUB-TOTAL Man made filament yarn Viscose Polyester Polypropylene Nylon Sub-total MMF+Man made filament yarn Grand Total % age share of natural cotton Source: Based on Textile Commissioner office, India and our projections by economic analysis deptt, Vardhman Group 14

15 India: Consumption of fiber in spun yarn production show that cotton will remain a dominant fiber Fiber usage in spun yarn ( mn tons) (proj) Others Polyester Cotton Source: Derived from spun yarn data reported in Textile Commissioner office, India and projections by economic analysis deptt, Vardhman Group 15

16 Indian textile industry size is expected to grow from $91 bn in 2012 to $160 bn by 2020 Exports Domestic market Source: Ministry of Textiles, India and projections by economic analysis deptt Vardhman Group 16

17 India: The textiles exports are estimated to grow at a higher rate than clothing 70 India: T&C exports ( $bn) India : Textile and clothing exports(% ) Textiles Clothing Clothing Textiles (p) Source: Textile Commissioner office and DGFT, India and projections by economic analysis deptt, Vardhman Group 17

18 Emerging clothing manufacturing hub in Asia offer opportunities for increased textile trade Growing free trade agreements among Asian countries leading to lowering of tariff and non tariff barriers facilitating movement of textile material within Asia Increased participations of LDC countries powered with low labour cost and trade preferential advantages in most of the importing countries Bangladesh Garments exports crossing $18 bn Vietnam Garment exports touching $15 bn Cambodia Good potential for clothing exports Myanmar Attracting investors especially Asian for garment manufacturing China focusing on high value realization on per kg fiber processed aiming $400 bn T&C exports, meeting its textile material requirements partially through imports India focusing on textile material production like yarns, fabric and home textiles With rising labour cost and inflexible labour laws, India may not be able to compete profitably with low value clothing products from emerging exporting countries Therefore, in Asia, there will be considerable interdependence among the textiles and clothing producers 18

19 Intra-Asia trade in textiles, which is increasing at a higher rate than world textile trade is an indicator to growing integration of Asian textile industry World trade in textiles-usd bn % World and Intra Asia textile trade growth trends ( ) 730% World trade in textiles Asia to world to Asia Intra- Asia trade as % to world % 600% 500% 400% 300% 200% 100% 280% Asia % share in world % Intra Asia World Source: WTO 19

20 Indian Textile Industry: Investment Perspective 2020 Continue India would retain its advantage of home grown cotton to large extent Indian textile industry may be biased towards textiles and cotton India would be producing 8100 mn kg yarn India will remain largest exporter of cotton yarn, which may grow from about 900 mn kg at present to 1500 mn kg by 2020 India would add additional 18 mn spindles India s installed capacity would grow to 66 mn spindles 20

21 Indian Textile Industry: Investment Perspective 2020 The share of woven fabric produced from shuttle-less looms would considerably grow by 2020 India would add about shuttlesslooms by 2020 More investment in modern garment manufacturing for domestic market would take place India would be more competitive in high value added products in export market Technical textiles may witness substantial growth in next few years Indian textile industry may attract a total investment of USD$70 bn by

22 Government of India has been promoting textile industry growth in India Higher incentives under TUF for shuttle-less looms and modern process houses reflecting the emphasis on weaving, processing and knitting also Exemptions on import duty on modern textile machinery Development of SEZ and apparel parks are put on fast track For infrastructure development in apparel parks, government provides subsidy to the extent of 40% of the project cost Special emphasis on skill development in textile industry-cost of skilling being reimbursed FDI in textile being encouraged- No approval/permission is required from RBI Many States are offering very attractive package of incentives to attract textile industry 22

23 Thank You