The sluggishness in the market is also due to the seasonal problems that Indian business has to face. Power shortage is very severe during the months of April and May in most parts of the country, affecting production.
"Demand and supply of polyester yarn is matching, but the industry expects prices to fall further and is hence holding back its purchases, or is making only hand-to-mouth purchases," says Rakesh Gothi, managing director, JBF Industries, one of the fast growing polyester manufacturers in the country.
"We expect this to continue till the next month at least, after which things should improve. I expect prices of POY to fall another 9-11 cents a kg," he adds.
The situation is no different in case of polyester staple fibre (PSF) and also in case of polyester blended yarns, where prices have been witnessing a declining trend.
"This fall in the price of polyester will help the blended yarn manufacturers to get competitive," says R.L. Toshniwal, managing director, Banswara Syntex, among the top manufacturers of polyester blended yarns and fabrics."
"We have been facing a very hard time due to the severe rise in prices some 4-5 months back," he explains.
Another reason cited for the low in the polyester market is the Chinese vacations which ended only Monday, 9 May.
The operating capacities in China were down by as much as 60-70 per cent. Demand for raw materials and yarns was therefore low, affecting international and Indian prices. Demand should now improve, according to market watchers.
However, at this moment, the stock levels with spinners, weavers, knitters, processors is very low. "By June 15, the market will begin to firm up, and July to September is the peak season in textiles in India," according to officials of Reliance Industries, among the world's top polyester manufacturers.
India produces around 100,000 to 110,000 metric tons POY per month, and this is set to increase as some newer players are expected to enter the market, while some are also expanding capacities. Bhilosa, Raj Rayon are among some of the companies that will be setting up POY capacities of 100-120 metric tonnes per day within the next 3-4 months.
"The demand for POY will increase in the months to come, as textile exports from the country are surging post-quota, and exports of polyester based textiles and apparel are also on the rise," Mr Gothi says. "This will eventually result in higher demand for polyester yarns."
This will also lead to an increase in the demand for polyester chips. India's production of chips falls far below the demand. While production and supply of chips is to the tune of 9,000 metric tons per month, demand is about 25,000 tons per month.
"Around 16,000-18,000 tons of polyester chips are being imported into the country. The situation will ease slightly once Garden Silk Mills' polyester chip capacity also becomes operational," says Mr Gothi.
Garden Silk Mills, one of the largest polyester fabric manufacturers in the country, is setting up a chip manufacturing capacity of 480 metric tons per day, or around 14,000 tons per month, of which around 250 metric tons of production per day will be sold in the market, while the remaining will be consumed in-house, according to market sources.
Even as chip imports are inevitable, Indian chip manufacturers lament about the underinvoiced imports coming into the country, mainly from China, Indonesia, etc.
"These chips are heavily underinvoiced, and yarn manufacturers using these chips are able to sell their yarns at prices much lower than the market price, creating unhealthy competition and depressing prices," says Mr Gothi. Chip manufacturers had tried to make a case of dumping against such imports, but were unable to collect all the facts and figures.
So, while the polyester manufacturers are waiting for better prices and margins, users are hoping that this trend of depressed prices continues for some time. Facing price competition from China will therefore become easier.
