Indian yarn shipment plunged to about 100 million kg in April and, according to industry estimate, further to 90 million kg each in May and June, after clocking average monthly exports of about 120 million kg in 2013-14, which was 33% more than the previous year.

In the first quarter ended June, yarn exports witnessed decline by about 20% year-on-year, with China reducing its fabric production due to which lesser demand from China, there has been an impact on yarn imports.

According to DK Nair, secretary general of Confederation of Indian Textile Industries, this is a temporary trend and hopefully things will change from September onwards.

Indian spinners are also buoyant that it is just a temporary issue and likely to see improvement in shipments, September onwards and also demand from within the country has also started improving ahead of the festival season.

As Pakistan is diverting its exports to EU taking advantage of the 9.6% additional benefit under GSP Plus agreement, India in the coming months will have more opportunities in China and other international markets but currently the Indian yarn exporters are facing problems in Europe with Pakistan granted GSP plus status by EU.

According to T Rajkumar, chairman at Southern India Mills' Association (SIMA), the enquiries for yarns and fabrics have started improving due to increased demand for the finished goods particularly garments and made-ups as the festivals are fast approaching.

Meanwhile, China has introduced a new cotton policy that came into effect on April 1. Under this, the government reset cotton auction bids at 17,250 yuan per tonne, or about Rs 1.70 lakh, down 4.2% from its floor price of 18,000 Yuan, or about Rs 1,78,000 per tonne.

With cotton prices ruling high in India, spinners are finding it difficult to export yarn at a price offered by China. For mills in Tamil Nadu, which produce 50% of the country's total yarn, the landed cost of good quality cotton ranges between Rs 45,000 to Rs 46,000 per candy of 355 kg.

Though West African cotton is Rs 1,000 -1,500 per candy cheaper than what is available in the domestic market, it would take three to four months for the cotton to arrive in the mills. Also, small and medium entities do not have access to imported cotton.

Therefore, there is no scope for reduction in yarn prices as the mills are already incurring losses with the cotton held by them.

As for coarser and medium count textile products, China depends on India and Pakistan. Now, the cotton market in the country is left with average and below average quality cotton till new stock arrives.