Financial Daily from THE HINDU group of publications
Sunday, Feb 15, 2004
Industry & Economy
Rising cotton prices to boost VSF demand Spinners face tight supply
Coimbatore , Feb. 14
WITH raw cotton prices spiralling in recent weeks, the market for the man-made fibre viscose staple fibre (VSF) too seems to be hotting up. Spinning mills that seek the fibre to substitute for high cost cotton may not get the needed solace as both its availability and price are anticipated to harden further in the face of a perceptible jump in demand for the man-made fibre consumption worldwide.
For the domestic spinners who get the entire VSF supplies from Grasim Industries, the worry-lines are already visible as the Aditya Birla group company is believed to have thrown hints to its clients on a tight supply situation this summer and also a possible surge in prices over the next few weeks.
The domestic spinners exclusively consuming VSF for 100 per cent viscose yarn production are the worried lots as they claim that Grasim Industries has started curtailing the `Birla Viscose' fibre supplies.
Industry sources here on condition of anonymity said that the company has this month reduced the supply to its consumers in the southern States by some15 per cent to 20 per cent over last supply levels, amidst a likely cut in VSF production from its stable.
One of Grasim Industries' three VSF producing units the Harihar in Karnataka is expected to be shut down anytime now for want of water for processing and hence, the supply of `Birla Viscose' will climb down from the current month onwards, the sources told Business Line.
But the company sources maintain that there has been no short supply of VSFdue to Harihar plant shutdown. The company had been able to maintain its production at 650-660 tonnes per day up to January 2004. This is against the average monthly domestic market demand for VSF, which has not gone beyond 500-540 tonnes in the past few years.
So, there is no question of any short supply to cause inconvenience to genuine users, the company sources argue. However, what it has done is to regulate the VSF supply so as not to allow the end-users building up stocks, especially when one of its plants would have to be shut down and demands are to be met. The shutdown may last for three to four months.
Grasim Industries produces diverse grade of VSF marketed under `Birla Viscose' brand from three units located in Madhya Pradesh, Gujarat and Karnataka.
But the VSF consuming mills in the southern region are suspicious that Grasim Industries, buoyed by the rising demand in China and other South East Asian markets, would be blocking considerable quantity meant for domestic sale to divert it for exports as the current international price for VSF has been higher by 40 cents per kg compared to the domestic market quotes.
It is said that China is set on seizing every opportunity to import alternative fibres from world markets as the soaring cotton prices have pushed it to mop up as much quantity of other fibres as possible.
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