Cotton Yarn Demand Revives As Mill Utilisation Crosses 90%

India’s spinning industry is witnessing a revival in cotton yarn demand, with capacity utilisation at textile mills crossing 90% and yarn inventories remaining low. However, a sharp rise in cotton prices is threatening to squeeze mill margins and raise concerns over the sustainability of operations.

The demand recovery has been under way for nearly five months, prompting mills to step up production after a prolonged period of subdued market conditions. With yarn stocks largely under control, the improvement in demand has provided some relief to the spinning sector.

The recovery, however, comes amid a steep increase in raw material costs. Domestic cotton prices, which ranged between Rs 51,700 and Rs 57,000 per candy from October 2025 to March 2026, have risen sharply in recent months. By September 2, prices had touched around Rs 70,000 per candy on an ex-gin basis.

The surge has been driven by stronger international demand and concerns over cotton availability. Rising demand from China, along with expectations of lower cotton production in the US and China, has added pressure to global prices. Domestic cotton prices have also increasingly tracked international benchmarks, including ICE Futures.

Spinning mills are keeping cotton inventories relatively lean, with many holding less than two months’ stock. While lower inventories have reduced their exposure to further price escalation, a sustained rise in cotton costs could increase yarn production expenses and put pressure on margins if the higher costs cannot be passed on to buyers.

The increase in raw material prices has already pushed up cotton yarn prices. But the domestic apparel market may not be large enough to absorb the entire production of Indian spinning mills, making export markets increasingly important for maintaining viable operations.

At the same time, tightening international yarn availability is providing some support to yarn prices. This could allow mills to pass on at least part of the increase in cotton costs, though the pace and extent of such price adjustments will be crucial to protecting profitability.

The industry has also highlighted the role of the Cotton Corporation of India (CCI) in managing domestic cotton supplies. With CCI holding substantial stocks procured under the minimum support price (MSP) regime, the release of adequate quantities into the market could help moderate domestic cotton prices and reduce price volatility.

The spinning industry, therefore, faces a mixed outlook. While stronger yarn demand and mill utilisation above 90% signal a recovery, the sharp rise in cotton prices remains a major threat to margins and could determine whether the current improvement can be sustained.