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Polyester yarn makers’ margins under pressure

With raw material prices rising by Rs 10-15 a kg in the domestic market in recent weeks, the margins of polyester yarn makers have fallen 10-15%.

“Our margins have been under pressure and have shrunk about 10% in the past few weeks. Yarn makers have been impacted due to multiple reasons, including reduced exports to and increased imports from China,” said Paritosh Aggarwal, managing director of Suryalakshmi Cotton Mills, which manufactures polyester yarn, cotton yarn and denim, among others.

K Selvaraju, secretary-general of the Southern India Mills’ Association, said, “Our spinning mills have seen margins drop 10-15%. Raw material prices, especially in the domestic market, have been rising. Most of our mills are dependent on the domestic market. Also, demand for yarn has been slack and this is putting further pressure on mills’ bottom lines.”

In the global market, however, the prices of purified terephthalic acid (PTA) and mono-ethylene glycol (MEG), two key raw materials used to make synthetic yarn, have remained low.

PTA and MEG are derivatives of crude oil.

US-based research agency Platts has said in the past two months, its petrochemical index has risen 6%. “Prices in the $ 3-trillion-plus global petrochemicals market rose for a second consecutive month, increasing four% in July to $ 1,446 a tonne, following a 2% rise in June,” according to the Platts Global Petrochemical Index.

On an annual basis, petrochemical prices rose 10% in July. The prices of crude oil and naphtha (a feedstock for petrochemicals) fell 5% and 2%, respectively.

“There are very few manufacturers and suppliers of polyester raw materials PTA and MEG. Yarn makers were mostly dependent on domestic raw materials. But with prices rising steadily through the past three months, they are being forced to import,” said a source.

In the domestic market, polyester yarn raw materials prices stand at Rs 115-120 a kg, against Rs 100 a kg three months ago. Prices in the international market stand at Rs 110 a kg.

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