Supply glut trims denim prices by 10% in six months

MUMBAI: Denim prices are facing a new slump with excess supply in international and domestic markets due to overproduction by India, Pakistan and Bangladesh.

“The price of denim has fallen by 10% over the last six months,” said Jayesh Shah, CFO, Arvind Mills. The Arvind plant has been running at 85% capacity from 92% about three months ago, he said.

Last year, overall domestic capacities have increased from 200m metres per annum to 350m metres per annum. Raymond increased its denim capacities by 10m metres to 40m metres, and has further increased its capacities to 80m metres through a JV with the Belgian company, UCO.

Century Denim, recently, doubled its denim plant to 20m metres and is set to launch its domestic brand. According to industry sources, denim production is on the rise in Bangladesh, Pakistan and China which are expanding their capacities resulting in a supply glut.

Not surprisingly, the manufacturers have started to turn their attention to the domestic market, which offers a respite with slightly better prices. “The local market thrives on value addition like embroidery and this is seen as a popular trend in the international scene as well. This will help companies endure the price slump,” Mr Shah said. In this scenario, garment manufacturers who do not have their own capacities have found that importing fabrics is more cost effective.

According to industry estimates, denim capacity in the country will see a growth of 65% to double to around 600m metres per annum by the end of ‘07. Presently, the denim market is growing at 6-7% in the international market, and 10% in the domestic market.