Exporting yarn to China: Total control and price-competitiveness
The mill report contributed by Uster Technologies highlights the
story of the successful Indian yarn supplier.
This article was actually initiated by Uster customers. The
author during a visit to Indian customers was asked to know what
kind of yarn is mainly produced in China, whereas the Chinese
customers asked the same question about Indian spinners. This
article answers these questions to a certain extent and focusses
on yarn trade between both countries. Vrajesh Kikani, Managing
Director of Kikani Exports provides insights regarding this
challenging business of selling yarns.
Exporting yarn to China is a massive opportunity and yet a
tremendous challenge. The market is huge and diverse, the
rewards can be worthwhile – but the risks are great, and
increasing. The key success factors are the same as for any
other market area: control of sourcing, quality and costs. Above
all else in China, price competitiveness is essential. One of
India’s leading yarn suppliers, Kikani Exports, has 12 years’
experience in exporting to China, firstly as a yarn trader
sourcing from Indian mills and later as a spinner.
Vrajesh Kikani, Managing Director explains that the biggest
difference between China and other export markets is the volume
of business available: “In China the volumes are huge. We
started selling there in 2004, with about 60 tonnes per month.
That increased over time to as much as 4,000 tonnes per month by
2014, but in the past year the market has been more or less
depressed, so we have recently been at a level of around 2,000
Despite the volatility, China remains a crucial customer for
Kikani and other suppliers from India, together with Bangladesh
representing about 60% of total exports in some cases. “If China
stops buying Indian yarn, it is a disaster. The domestic market
cannot take the big volume of Indian spinning mills, and the
textile industry and especially cotton spinning employs a lot of
people,” says Mr. Kikani.
Quality strategy and in-house spinning
Kikani’s experience in yarn trading has provided a valuable
overview of the requirements spinners must fulfil to survive in
the China. Quality management is right at the top of the list,
and Kikani has put in place a carefully-planned strategy to
ensure consistent control of every aspect.
It begins with sourcing – the right yarns at the right price
from reliable spinners. The company has a fully-equipped
testing laboratory, with latest USTER technology for fibre and
yarn quality assurance. “We rely on USTER guidelines, ensuring
our quality consistency within defect tolerances below 5%. Staff
training for quality management is also a priority, and we
implement both routine quality checks and random audits.”
It was this quality-minded approach that led Kikani to invest
in its own spinning mill operation, to extend the options beyond
its yarn trading business. The new mill, in the Ahmedabad
District of Gujarat, started in 2015, expanding to 29,376
spindles and 4,320 TFO drums by the end of the year.
“As a trader, we were not always able to convince the quality
conscious customer. This prompted us to look into backwards
integration, focusing only on value-added yarn for niche
markets,” Mr. Kikani says.
Overall, Kikani has a customer base of almost 100 companies,
about 50% of which is based on long-term stable relationships.
The company’s in-house yarn production is combined with yarns
from other spinners in India. Kikani uses experience gained over
several years to identify appropriate sources for each specific
count range and quality level. A special advantage for knitting
yarn is Kikani’s focus on a Gujarat cotton type known as Shankar
6, which is said to have the lowest contamination rate.
Indian cotton: Tackling contamination
Competing in China is a double-edged problem, facing both
local yarn producers and other exporters. Kikani has a major
advantage here, with its access to Indian cotton growers and its
detailed knowledge of the characteristics of the raw cottons.
The contamination by foreign matter is a serious issue, and
although it is generally ‘expected’ by spinners and their
customers, there is a constant and growing need to monitor and
control this aspect. Kikani achieves this in its own spinning
mill by a combination of the latest USTER® JOSSI MAGIC EYE
detection in the blow room and USTER®QUANTUM 3 (PP option)
clearers on its winders.
Mr. Kikani says: “Quality is one of our main advantages over
local Chinese yarn producers. In fact, we find that quality
requirements from most world markets are increasing, so there is
very little difference in that respect between Chinese and other
Trading houses mean volume business
Kikani sells to major trading houses in China, as well as to
individual weaving and knitting companies and yarn dyers. The
yarn range includes both carded and combed varieties, across as
count range of Ne 16 to Ne 40 ring spun, including compact, and
Ne 6 to Ne 24 in OE-spun. Most yarns are 100% virgin cotton or
blends with waste cotton. Although the Chinese export business
is large and extremely important to Kikani, it is not usually as
lucrative as sales to the domestic Indian market, where prices
are generally higher. However, the China trade offers greater
volumes and is mainly financed through letters of credit (LCs),
which provides for quicker payments compared to
locally-negotiated deals with Indian customers. Selling directly
to mills in China can also attract better prices, but many
Chinese weavers and knitters are unable or unwilling to work
through LCs, preferring to pay in currency or to hand the
purchasing over to traders.
For the future, Mr. Kikani is expecting the current tough
market environment to become even tougher. “Our volumes into
China will come down for sure, because of increasing competition
from Vietnam and other countries, as they have preferential duty
structures. Hence, unless Indian suppliers are extremely
competitive, yarn sales to China will be an even greater
challenge in the days to come,” concluded Mr. Kikani.