India's Polyester Yarn Imports Surge in FY23, Marking a Decade-Long Shift
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- Published: Wednesday, 24 January 2024 04:36
India's textile industry faced a significant shift in trade dynamics during the financial year 2023 (FY23) as polyester yarn imports soared by 65%, while exports plummeted by 38%, according to CareEdge Ratings. This marked a pivotal moment as India became a net importer of polyester yarn for the first time in a decade, a trend that continued into the first eight months (8M) of FY24. The surge in imports, primarily from China, inundated the domestic market, impacting the pricing power of Indian manufacturers and causing a decline in export volumes.
The global production of polyester fibre, accounting for 54% of total fibre production in calendar year 2022 (CY22), saw China emerge as the dominant player, overshadowing India, the second-largest producer. India's annual domestic production of polyester yarn ranges between 4.5 to 5 million tonnes, with over 80% consumed domestically. However, FY23 witnessed a disruption in trade dynamics due to China's zero-COVID policy, resulting in surplus polyester yarn flooding global markets, including India.
Despite a slower recovery of the Chinese economy, manufacturers continued production unabated, leading to the dumping of surplus polyester yarn in global markets at reduced prices. This influx of cheaper imports adversely impacted the operating profitability of Indian polyester yarn players, leading to a decline in average sales realization and PBILDT margin.
To address the challenge of inferior quality imports, the Indian government implemented a Quality Control Order (QCO) on polyester yarn, including fully drawn yarn (FDY) and partially oriented yarn (POY). The Bureau of Indian Standards (BIS) played a crucial role in ensuring compliance with these standards, with implementation taking effect from October 5, 2023. This led to a surge in imports in September 2023 due to pre-buying, followed by a significant decline in November 2023.
Looking ahead, CareEdge Ratings anticipates a reduction in polyester yarn imports, allowing Indian industry players to potentially increase prices and improve average sales realization. The spread of polyester yarn is expected to improve gradually, with a resurgence in domestic demand in key markets like China, the US, and Europe. This forecasted improvement is expected to narrow the demand-supply gap and revive export demand for Indian polyester yarn manufacturers, indicating a potential turnaround in the industry's fortunes.