Indore: Skyrocketing prices of cotton and less demand for yarn from the top buyer China, is expected to hit the profit and the production capacity of the spinning units of the state. Spinning units may reduce the production of yarn in coming months as higher raw material prices are eating up the profitability of the units.

Also, yarn prices have been unattractive in the market due to sluggish demand from the top buyer China.

Spot cotton prices in the local market have risen to over Rs127 per kg from Rs98 per kg in April, according to local traders due to a fall in the production. While during the same time period, yarn prices rose to just Rs200 per kg from Rs178 per kg in April.

Cotton production in the fiscal year 2015-16 (crop year October- September) fell to 352 lakh bales (170 kg each) as against 380 lakh in the previous year.
Suresh Maheshwari, president, Maral Overseas said, "Yarn prices are not increasing in tandem with cotton making it difficult for the spinners to be in business. Spinners may have to cut the output as purchasing cotton at such an expensive prices and making yarn that is not much in demand is not helping spinners. Supply of cotton has reduced in the local markets further pushing the prices, while the arrivals from the new crop are expected only by October.

Piyush Mutha, managing director, Vippy Spinpro said, "Everybody is facing the crisis, but units that have some stock are somehow managing. Buying at current prices is not viable in this market