Rise in cotton prices strains South India spinners’ margins

The South Indian textile value chain is facing a period of acute margin decline as domestic raw cotton prices increased to Rs 60,000 per candy, a trend pushed by tightening global supplies and persistent drought conditions in the US. While ICE cotton futures have recently traded near two-year highs of 81 cents per pound, spinning mills in regional hubs like Tiruppur and Coimbatore are struggling to pass these costs down the value chain.

Statistics show, while raw material costs have increased approximately 10 per cent since the start of the year, cotton yarn demand from the apparel segment remains fragile, largely due to macroeconomic uncertainty and a cautious wait-and-watch approach from international retailers. The disparity between input costs and realization prices has forced several small and medium-scale spinning units to rationalize production.

The current upward revision in yarn rates, roughly Rs 5-10 per kg is a reactionary measure to offset raw fiber costs, yet it has not been met with equivalent buying interest from the knitting and weaving sectors, note analysts. Downstream manufacturers are increasingly exploring polyester-cotton blends as high-tenacity synthetic fibers become more price-competitive following a recent stabilization in crude-linked raw materials. Despite these headwinds, the industry eyes a potential recovery in the H2, FY26, supported by the government’s deferred Quality Control Orders (QCO) and the projected expansion of the Kasturi Cotton Bharat branding initiative.

Based in Tamil Nadu, the regional industry comprises over 2,000 spinning mills specializing in premium combed and carded yarns for the global apparel market. With a focus on the EU and US, these manufacturers are currently transitioning toward sustainable fibers and AI-integrated quality control to improve long-term fiscal resilience.