Exports of cotton from India have been on the rise as a result of a depreciation in the rupee and as prices soared in overseas markets, prompting Asian buyers like China and Vietnam to jack up buying, analysts said.
India has shipped more than 1 million cotton bales since the 2019-2020 marketing period, and another 700,000 bales have been readied for shipment this month and February, exporters told Reuters.
However, those figures are about to change as India starts to feel the pinch brought about by the current coronavirus outbreak that's wreaking havoc in China.
Kotak Commodity Services Pvt., one of India's leading cotton exporters, will stop shipping new orders to China on worries the spread of the virus may force its main customer to shut down banks and ports.
The Mumbai-based fiber maker will look for new clients of their product in countries like Indonesia, Vietnam, and Bangladesh to offset any possible decline in sales to China, Vinay Kotak, company director, disclosed on Wednesday.
According to Kotak, there is no reason to worry, but if the coronavirus continues to spread and is not contained in the next 10 to 15 days, then "it will create a major problem for the world's cotton industry."
India's cotton exporters have already delivered 600,000 to 700,000 bales of 170 kilos each to Chinese customers so far this year and of that, around one-third is in transit, Kotak said.
Exporters were planning to deliver another batch of 300,000-bales to China by end of February, but "If the ports and banks are closed down" Kotak said shipments will not push through.
The increase in exports from the country could put a heavy burden on global prices for the commodity, which is trading near its highest in 8 months, and affect deliveries from competitors like the US and Brazil to key Asian buyers, especially with the outbreak in China.
Cotton's price in the global market has dropped by 3 percent in the last few days, and local figures have reacted accordingly to the current uncertainty in China, Cotton Association of India president Atul Ganatra said.
Kotak said any indications of disruption in cotton exports to China could pressure prices that had been recovering from three-year losses. Although it is a huge producer of cotton, China is also the largest importer in the world.
Meanwhile, for India's cotton believers, the coronavirus problem in China is not a major issue. India's exports are price-competitive and seeking out new customers will not be difficult, Atul Ganatra, president of the Cotton Association of India, remarked.
