India: Coimbatore mills reduce output as waste cotton prices rise

• Tight supply, rising processing costs push up waste cotton prices
• Lower mill operations to weigh on lint demand, ginning margins

Spinning mills in Coimbatore have reduced production over the past 24 hours as the economics of using waste cotton for recycled yarn became unviable due to rising prices. This situation has emerged despite a clear fall in raw cotton prices, which have eased to around INR 6,000/candy after the government’s suspension of import duty made imports cheaper for mills.

In normal market conditions, a decline in primary fibre costs supports margins. However, waste cotton prices have moved in the opposite direction, rising by INR 4-8/kg over the last two months. This price divergence has placed mills under pressure, particularly those relying on a mix of raw cotton and waste cotton for open-end yarns and recycled blends.

Why waste cotton prices are rising

The primary reason behind this imbalance is the tightening supply of quality waste cotton material. Processing costs for waste streams have increased, while demand from units producing recycled fibres has remained firm. Even though raw cotton became more affordable due to import parity, the waste cotton market experienced an upward shift, driven by inconsistent availability. As mills depend on maintaining an economical ratio between raw and waste fibre, the widening gap quickly eroded margin viability. Producing lower-count yarns that depend heavily on waste cotton has turned loss-making, forcing mills to reduce utilisation.

Far-reaching impact of production cuts

This reduction in spinning activity has implications across the cotton value chain. For ginners, lower mill operations translate to reduced offtake of lint. As mills consume less lint, inventories may accumulate at ginning centres, creating pressure on lint prices and thinning margins. Traders dealing in lint and yarn may also see narrowing spreads, as weak domestic demand and fluctuating waste cotton costs disrupt pricing consistency. Yarn orders, both domestic and export-oriented, have remained subdued, amplifying the effect of reduced mill utilisation.

Outlook

Going forward, the industry may face short-term volatility as mills balance cost pressures with demand trends. If waste cotton prices remain high while raw cotton stays soft, the gap could discourage recycling-based production for an extended period. In such a scenario, waste cotton suppliers may experience either excess stock or abrupt price corrections, depending on how quickly mills adjust their procurement. For the lint market, sustained low utilisation could push inventories higher, compelling ginners to offer discounts or hold stock longer, both of which strain liquidity.

Market participants should closely monitor mill utilisation levels in Tamil Nadu, the spread between raw cotton and waste cotton, and inventory build-ups at ginning units. These indicators will shape trading opportunities, risk exposure, and price movements in the coming weeks.

If the cost imbalance persists, selective consolidation among spinning and recycling units is likely, with financially stronger mills better positioned to withstand the volatility.