Chinese economy casts its shadow over Indian exports of cotton and copper
NEW DELHI : Indian companies in the commodity business from sectors including cotton and yarn, metals and mining, and capital goods are facing the brunt of structural changes in the Chinese economy. As China shifts to a consumption-driven economy after focusing on manufacturing for decades, China's import of commodity products is on the decline, while its exports of finished products is rising due to excess manufacturing capacity.
China imported 7 per cent less cotton yarn from India in the three months to October 2015 over the preceding three months; the fall in import was sharp in October. This is a negative for companies like Vardhman, Nitin Spinners, RSWM, Sutlej Textiles, Nahar spinning which are in this space.
"China has reduced its imports of cotton. Cotton prices have been falling over the last few months.
Revenue of cotton yarn manufacturing companies may fall in the 5 per cent-10 per cent range in the second half," said Sanjay Jain, VP, Hosiery Manufacturer Association of India.
The mining and minerals sector is facing a similar pressure. India's copper export to China fell 44 per cent in April to October 2015 over last year. Copper is among the top five export items to China. Therefore, a fall in Chinese import has impacted Indian copper producers. In addition, China started exporting iron ore to India. Its export to India rose 10 per cent thereby putting pressure on Indian iron ore prices.