Authorised Learning Centre

ACIIT INSTITUTE, Ludhiana.

Learning Centre Code No. 1788

FUTURE PROSPECTS OF POLYESTER YARNFUTURE PROSPECTS OF POLYESTER YARN

BY

ANURAG VARSHNEYANURAG VARSHNEY

Roll No.: 510928963

A project report submitted in partial fulfillment of the requirement for

MASTER OF BUSINESS MANAGEMENTMASTER OF BUSINESS MANAGEMENT

Of Sikkim Manipal University, INDIA

Directorate of Distance Education

S I K K I M M A N I P A L U N I V E R S I T Y

Of Health, Medical & Technology Sciences

Syndicate house, Manipal – 576 119

I here by declare that the project report entitled

FUTURE PROSPECTS OF POLYESTER YARNFUTURE PROSPECTS OF POLYESTER YARN

Submitted in partial fulfillment of the requirement for the degree of

MASTER OF BUSINESS MANAGEMENTMASTER OF BUSINESS MANAGEMENT

To Sikkim Manipal University, INDIA

Is my original work and not submitted for the award of any other degree, diploma fellowship, or any other similar title or prizes

Place: LUDHIANA ANURAG VARSHNEY

Date: 26/12/2010 Reg. No.: 510928963

The Project Report of

ANURAG VARSHNEYANURAG VARSHNEY

Is approved and is acceptable in quality and form

Internal Examiner External Examiners

(Name, Qualification and Designation) (Name, Qualification)

This is to certify that the project report entitled

FUTURE PROSPECTS OF POLYESTER YARNFUTURE PROSPECTS OF POLYESTER YARN

Submitted in partial fulfillment of the requirement for the degree of

MASTER OF BUSINESS MANAGEMENTMASTER OF BUSINESS MANAGEMENT

Of Sikkim Manipal University, INDIA

Distance Education Wing

S I K K I M M A N I P A L U N I V E R S I T Y

Of Health, Medical & Technology Sciences

ANURAG VARSHNEYANURAG VARSHNEY

Has worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, Diploma, Fellowship or other similar titles or prizes and that the work has not been published in

any journal or Magazine.

Certified M. VENUGOPAL

MBAMANAGER

RELIANCE INDUSTRIES LIMITED

TABLE OF CONTENTS:

Executive summary

i) Introduction

ii) Objective

iii) Methodology.

iv) Analysis

v) Conclusions

vi) Recommendations.

Part I.

Company Profile

i) Brief Introduction of a company

ii) History (very brief) of the organization.

PART IIProject overview

i) Introduction.

ii) Objective

iii) Methodology

iv) Analysis

v) conclusions

vi) Recommendations.

Part III

i) Appendix

ii) Bibliography

iii) References

iv) Glossary

Note: this is only suggestive but not exhaustive

EXECUTIVE SUMMARY

1. INTRODUCTION

1.1 INDIAN MANMADE FIBRE INDUSTRY

Initially, a company engaged in the production of manmade fibres has the

option to set up the largest capacity that the market can absorb, decide

the level of participation in the manmade fibres chain, and use the most

cost-effective technology. To a large extent, these factors determine the

profitability and cost structure of a manmade fibre company, while later

efforts are focused on managing the facilities efficiently and effectively.

Currently, the Indian textile industry accounts for 9.0% of the global

textile fibres production. India is the fifth largest manmade fibre producer

in the world, after China, South Korea, Taiwan and Japan. Of the global

production of around 24.0 million tonnes of manmade fibres, India

produces around 1.5 million tonnes. Thus, India’s share of the world

manmade fibres output is low at around 7.0%.The demand for polyester

in the domestic market increased at the fast pace of over 15% during the

1990s. Currently, polyester accounts for a significant 38% share of the

country’s total fibre consumption (for ultimate use in the domestic

market, the share is even higher at more than 50%).Further, the weaving

industry, being weak, finds it difficult to export synthetic fibre based

textile goods (the cotton and cotton-blend textiles and clothing are

exported from India mainly on the strength of low raw cotton prices).

Thus, with textile trade coming under the World Trade Organisation

(WTO) regime, the Indian manmade fabrics and apparel industry would

have to measure up to the challenge of imports (fabrics and apparel are

under a higher threat from imports than other forms of textile) as also a

domestic manmade fibres market that is getting increasingly saturated.

The Indian manmade fibres industry has a pyramidal structure, i.e. there

are many companies with capacities while only a few have large

capacities. The entry of very large integrated players have not only

turned the small players sick, but also hurt the medium capacity players

who are showing poor financial performance. The stock prices of these

middle-capacity players have taken a severe beating, making them good

targets for acquisition by the financially strong players. Already, market

leader Reliance Industries Limited (RIL) has acquired various medium-

capacity players in the Indian polyester filament & fibre industry (like

Raymond Synthetics, ICI and DCL Polyester; JCT Fibers, OSL,IPL and

BRPL). The acquisition of small capacity players is expected to lead to an

overall decline in the number of players in the Indian manmade fibres

industry, resulting in lower fragmentation. So long, the significant decline

in polyester prices had severely affected its substitutes such as viscose

staple fibre, acrylic and nylon. However, with polyester margins and

prices showing a rising trend, the prospects for these businesses are also

expected to improve.

1.2 WORLD TEXTILE INDUSTRY

Global growth of the textile industry from the beginning of the decade is

being phenomenal. It improved from the 2.2% in 2001 to more than

2.5%. In the face of major uncertainties in the global environment, any

forecasts on the future prospects are extremely difficult. Though global

GDP is expected to rise, the dangers of the world economy sliding toward

recession are real. As for the textile industry’s performance, no

fundamental changes occurred. The U.S. and the EU are still the most

important regions in terms of consumption. Asia, with China taking the

unquestioned lead, has gained further market shares in terms of

production. As a result, the gap between supply and demand has further

widened.

The U.S. and China, representatively of the developed and developing

countries, each stand for an extreme position in this industry.

The textile and apparel industry will increasingly center on China in the

years to come China has continued increasing production, being protected

by high tariffs and an import license system. Investments have been

fuelled by massive Chinese subsidies in various forms. Forced to lend in

large amounts to unprofitable state-owned enterprises, China’s banking

sector has accumulated at least a 40 to 50% ratio of non-performing

loans to assets. This means that the Chinese government has about

$400-500 billion of bad loans that must be resolved. Furthermore,

intellectual property rights infringements are increasingly causing

concerns. A recent estimate by the U.S. Department of Commerce

assumes lost sales of more than $100 million annually. The Chinese

synthetic fiber industry is highly dependent on imported synthetic fiber

raw materials. Reductions of import tariffs are advantageous for local

synthetic fiber producers. However, particular concerns may arise for the

polyester fiber intermediates sector. The phasing-out of the multi fiber

agreement in 2005, too soon to examine its impacts yet, will present an

enormous challenge to the developed world.

2. OBJECTIVE OF STUDY

To complete the project as per time frame decided.

To meet the key marketing personnel’s for better information.

To meet experts in the field.

To browse the web for data collection and study about environment.

To collect information about firm, products, industry, market,

competitors and general environment.

To analyze the data collected.

To forecast projections for the coming years.

To derive conclusion based on analysis.

To prepare the project report.

3. RESEARCH METHODOLOGY

3.1 INTRODUCTION

This chapter deals with stepwise procedure adopted to carry out this

project. It is felt that the procedure adopted here is sufficiently effective and

most accurate in the light of research with various limitation.

3.2 PROBLEM STATEMENT

To study the current global fiber scenario and domestic fiber scenario and

study the growth prospects for RIL, in PSF business, in the current

decade .

3.3 RESEARCH DESIGN

The primary purpose of this study is to provide comprehensive market

intelligence on a domestic level for Polyester staple fiber. This study

attempts to provide a comprehensive review of the global fiber market

scenario and analyzes trends in INDIA with emphasis on RIL’s PSF

Bussiness prospects up to the year 2010.A combination of primary and

secondary research have been used for all findings. The usage of

obtained information is based on the perceived reliability of the source by

the researcher. It is based upon my belief that companies in the

advanced world have started to look at newer niche opportunities very

aggressively. I’ve studied the impact of the growing competition in the

Asian region and on how the polyester bases are shifting to Asia .The

next step was to conduct exploratory primary research, involving phone

calls to marketing and sales executives in the market, for additional

strength to the issues and trends in the business, that were identified

originally by secondary research. Primary research interviews included

those with executives in the industry. Generally, executives contacted for

this information are experts in this field having a wide gamut of

knowledge in this field.

Following steps were carried out for the study.

Step-1 : Situation analysis

Step-2 : Preliminary investigation

Step-3 : Study Design

Step-4 : Data Source and collection

Step-5 : Analysis of data

Step-6 : Conclusion

Step-7 : Report writing

3.3.1 SITUATION ANALYSIS

Following activities were carried out in situation analysis.

Preliminary information about the firm. it’s products, the industry,

the market, competitors and general environment around the firm.

Familiarity of the situation surrounding the problem.

3.3.2 PRELIMINARY INVESTIGATION

The global synthetic fibre industry caters to the gaps where the natural

fibre fails to bridge in. With growing of population and the need for

cultivation puts tremendous pressure in the field to develop substitute

fibre which will cater to the need of the civilization. Whereas the growing

concern for envirionment is pressurizing the envirionment for

biodegradable fibres in one hand on the otherhand fashion trends and

changes in technology and political changes are making the market place

full of adventures and challenges.

Fibre market is studied from the global prespective in general with

their impact on the polyester industries in India.

In India the market is studied for emerging trends in the polyester staple

fibre business .

3.3.3 STUDY DESIGN

Management Dillema

(Prospects of the PSF

bussiness)

Management Question What is the Current/future PSF

business scenario?

Project Question What is the trend of PSF and

what should be RIL’s Stratergy to be a market leader in PSF bussiness?

Project Design

Primary research

Meeting experts Studying journalsand news letters

Secondary research

Studying Browsing Browsibooks and company ngtrade reports sites intranetandpublications

DATA COLLECTION

ANALYSIS

CONCLUSION

REPORT WRITING

3.3.4 DATA COLLECTION

The research data is of two types

viz. primary data and secondary data.

3.3.4.1 PRIMARY DATA

Primary data has been collected through

discussions with experts for their opinion in the relevant

field.

3.3.4.2 SECONDARY DATA

Secondary data was collected from a varied

source -

1. Trade Publications and trade bulletins

2. Browsing internet

3. Browsing intranet

4. journals and magazines

Various references are enlisted in the annexure &

bibliography.

4 ANALYSIS OF DATA.

Projections were done on the basis of time series trend analysis. Seasonal

factors impacting the trends is taken care off by considering yearly data

alone. Trend analysis & Regression analysis of data was done with respect

to demand determinants to extrapolate projections up to 2010. MINITAB

was used extensively to do statistical calculations and projections.

5 CONCLUSIONS

Conclusion is derived from secondary research are verified by consulting

experts in the field.

REPORT WRITING

First the world fiber scenario is seen from the current perspective. A

tremendous growth is seen in the fibre production capacities in this

decade. How synthetic fibre overtook the natural fibre production

capacities and how polyester emerged as a prime fibre with a tremendous

growth potential is analyzed. The report also throws light into how the

polyester base is shifting to the east. Finally the RIL PSF business is

studied in detail.

Part I

COMPANY PROFILE

7.0 RELIANCE POLYESTER STAPLE FIBER BUSSINESS

7.1 INTRODUCTION

This section deals with the ril polyester staple fibre bussiness.

Polyester staple fibre is a versatile fibre and is a close substitute of

cotton and viscose. It blends easily with any other natural and

regenerated fiber. This section deals with the product,production

facilities, pricing, psf demand and supply and ril market share.

Reliance is amongst the five largest producer of Polyester Staple Fibre in

the world. It offers a complete range of products for a variety of

applications, on time and at the right price has given it a market

leading position in the country and a preferred vendor status with the

world's leading spinners and composite mills.

RecronTM Staple Fibre is available in both, Fibre and TOW forms and is

procurable even in the remotest locations through our vast network of

offices and agents.RecronTM Staple Fibre, the most wanted substitute

for cotton. Reliance is the fifth largest producer of PSF in the world

with 386,000 tonnes of capacity available per annum. Today, PSF is

the lowest cost fibre for the Indian spinning industry, as compared to

cotton, viscose and acrylic fibres. Market development initiatives have

opened up an entirely new demand segment for PSF - cotton

substitution on open end and ring frame machines. RIL started

producing PSF in 1986 at Patalganga in Maharastra, and since then

there has been no looking back. Besides having two manufacturing

sites at Patalganga and Hazira, there are capacities of Apollo Fibres

Ltd. (Hosiarpur), India Polyfibres (Barabanki) and Orissa Synthetics

(Dhenkanal).

7.1.1 RELIANCE GROUP

The Reliance Group founded by Dhirubhai H. Ambani (1932-2002) is

India’s largest business house with total revenues of over Rs 99,000

crore (US$ 22.6 billion), cash profit of

Rs 12,500 crore (US$ 2.8 billion), net profit of Rs 6,200 crore (US$ 1.4

billion) and exports of Rs 15,900 crore (US$ 3.6 billion).

The Group’s activities span exploration and production (E&P) of oil and

gas, refining and marketing, petrochemicals (polyester, polymers, and

intermediates), textiles, financial services and insurance, power,

telecom and infocom initiatives. The Group exports its products to

more than 100 countries the world over. Reliance emerged as India’s

Most Admired Business House, for the third successive year in a TNS

Mode survey for 2003.

Reliance Group revenue is equivalent to about 3.5% of India’s GDP.

The Group contributes nearly 10% of the country’s indirect tax

revenues and over 6% of India’s exports. Reliance is trusted by an

investor family of over 3.1 million - India’s largest.

7.1.2 RELIANCE INDUSTRIES LIMITED

Reliance Industries Limited (RIL) is India’s largest private sector

company on all major financial parameters with gross turnover of Rs

74,418 crore (US$ 17 billion), cash profit of Rs 9,197 crore (US$ 2.1

billion), net profit of Rs 5,160 crore (US$ 1.2 billion), net worth of Rs

34,452 crore (US$ 7.9 billion) and total assets of Rs 71,157 crore (US$

16.3 billion).

RIL is the first and only private sector company from India to feature

in the 2004 Fortune Global 500 list of ‘World’s Largest Corporations’

and ranks amongst the world’s top 200 in terms of profits. RIL also

emerged as the only Indian company in the list of global companies

that create most value for their shareholders, published by Financial

Times based on a global survey and research conducted by

PricewaterhouseCoopers in 2004. RIL featured in the Forbes Global list of

world’s 400 best big companies and in FT Global 500 list of world’s

largest companies.

RIL emerged as the ‘Best Managed Company’ in India in a study by

Business Today and A.T. Kearney in 2003. The company emerged

‘India’s biggest wealth creator’ in the private sector over a 5-year

period in a study by Business Today - Stern Stewart in 2004.

7.1.3 RELIANCE - GLOBAL RANKS

Table-44

Product No Capacity Global

of sites ( ‘000 MT ) Ranking

Polyester 10 880 1st largest

PX 2 1700 3rd largest

Refinery 1 32000 5th largest

PTA 2 1300 5th largest

PP 2 1120 7th largest

Polymer 5 2565 Among top 10

PART II

2.5 SCOPE OF STUDY

The growth of manmade fibres in the textile industry has been

phenomenal. With more and more cotton being exported out of the

country, not much is available for domestic use. Manmade fibres,

particularly polyester, are not only abundant but are affordable too and is

gaining rapid acceptance. So much so that the frenzy of setting up plants

led the industry to a situation of over-capacity. This combined with poor

global margins damage the profitability of domestic manufacturers.

The small and non-integrated players are finding it increasingly difficult to

survive -- in fact many have folded up. Although polyester fibre demand

zipped along at a 10 per cent rate over the last decade, it may not grow

so fast in the future. A lot depends on the future world trade scenario.

With the MFA coming to an end in 2005, patterns of trade flows are likely

to undergo major change. This will impact the growth of the industry in

India too. With uncertainty regarding future exports, Indian players have

been cautious about capacity expansion plans. Industry experts feel that

demand growth would witness significant increases if the bias against

manmade fibres in terms of duties were eliminated. There has been a

recent up trend in polyester industry operating rates, which is likely to

boost margins and enhance profitability. If demand does find strength,

there is scope for additional capacities but these will be restricted to the

larger, integrated and financially strong companies.

Since its inception in the last century polyester fiber has shown a

dramatic growth .By the seventies synthetic fibre production have

superseded the natural fiber growth. The growth is mainly due to the

properties of synthetic fibre, which make them more durable, and with

the advent of technological invasions, like micro fibres and biodegradable

fibres the total production scenario of the fibre market have changed.

Polyester has shown a spectacular growth with respect to other fibers and

PSF, which is a close substitute of cotton, have also shown a spectacular

growth.

‘ Low profit margin of PSF business and difficulties in maintaining the

existing domestic market share of the business in coming years and

growing international competition in the market ’

Reliance Industries Ltd is the no.1 private sector company of India and is

the largest producer of PSF (Polyester Staple Fibre) in the world, having a

domestic market share of 71 %. With the increasing competition and low

profit margin of the product, to grow at the same rate is the toughest job

for today.

To retain the same market share and grow on a continuous basis, it is

imperative to scan the environment on a continuous basis to formulate &

implemlement stratergy to gain competitive advantage to attain business

growth.

2.6 STUDY RELIABILITY AND REPORTING LIMITATIONS

Primary and secondary research was performed to determine market size,

growth trends, major impacting factors, and relative strengths and

weaknesses of companies. While extensive effort is made to provide

reliable information. Often times more than a few sources are used to

derive the final published data. It is beyond the scope to evaluate the

credibility of these sources and validity of such obtained data. Only

secondary research may be the source. Experts consulted are industry

specialists with a lot of experience in this particular field.

2.7 TOOLS USED FOR ANALYSIS

MINITAB 13@ is used extensively for all statistical analysis. For

projections

- Double exponential smoothening method is applied for trend

projections.

- Regression analysis is carried out for trend projections.

PART II

3.0 FIBER OVERVIEW

3.1 INTRODUCTION

This chapter deals with the types of fibre and about the fibre value chain .

it also contains the PSF manufacturing process,properties of PSF,types of

PSF as the ultimate aim of this project is to associated with RIL PSF

Bussiness.

3.2 CLASSIFICATION OF FIBRES

"A fiber is the basic entity, either natural or manufactured, which is

twisted into yarns, and then used in the production of a fabric."

Since ancient times, cotton and wool are the fibers which people are

aware of. Different kinds of fabrics were woven using these two fibers,

thus providing warmth and comfort when worn. These were being used for

making personal fashions and decoration of home etc., It was in the year

1950 that production of man-made fiber began for commercial use. The

finest silk - 'micro fiber' was developed in the year 1993. At present

artificial fiber (man made ) such as polyester is being used as the fashion of

the day all over the world.

Thus, with the discovery of many more natural, man-made (chemical)

and mineral fibers, we have indeed come a long way.

Fibers can be broadly classified into two categories:

Natural Fibers & Synthetic Fibers

Natural fibers which dominate the market are:

Cotton

Wool

Silk

Jute

Man-made fibers (chemical/ Synthetic fibers)

Synthetic fibers can be classified into two categories viz; organic

and inorganic

Organic fibers which dominate the market are:

Polyester

Polyamide(Nylon)

Acrylic

Polypropylene

Elastane , Aramid , Carbon (prominent specialty fiber)

Regenerated fiber ( cellulosic )

Inorganic fibers which dominate the market are:

Asbestous

Carbonfibers

Glass fibers

3.3 POLYESTER STAPLE FIBRE

3.3.1 FIBRE MANUFACTURING PROCESS

Today over 70 to 75% of polyester is produced by CP( continuous

polymerization) process using PTA(purified Terephthalic Acid) and MEG. The

old process is called Batch process using DMT( Dimethy

Terephthalate) and MEG( Mono Ethylene Glycol).

Catalysts like Sb3O3 (ANTIMONY TRIOXIDE) are used to start and control

the reaction. TiO2 (Titanium di oxide) is added to make the polyester

fibre / filament dull. Spin finishes are added at melt spinning and draw

machine to provide static protection and have cohesion and certain

frictional properties to enable fibre get processed through textile spinning

machinery without any problem.

PTA , which is a white powder is fed into hot MEG to dissolve it. Then

catalysts and TiO 2 are added. After that Esterification takes place at high

temperature. Then monomer is formed . Polymerization is carried out at

high temperature (290 to 300 degree centigrade) and in almost total

vacuum. Monomer gets polymerized into the final product, PET (Poly

ethylene Terephthalate).

This is in the form of thick viscous liquid. This liquid is them pumped to

melt spinning machines. These machines may be single sided or double

sided and can have 36/48/64 spinning positions. At each position , the

polymer is pumped by a metering pump-which discharges an accurate

quantity of polymer per revolution ( to control the denier of the fibre)

through a pack which has sand or stainless steel particles as filter media

and a spinneret which could be circular or rectangular and will have a

specific number of holes depending on the technology used and the final

denier being produced. Polymer comes out of each hole of the spinneret

and is instantly solidified by the flow of cool dry air. This process is called

quenching. The filaments from each spinneret are collected together to

form a small ribbon, passed over a wheel which rotates in a bath of spin

finish: and this ribbon is then mixed with ribbon coming from other

spinning positions, this combined ribbon is a tow and is coiled in cans.

The material is called undrawn TOW and has no textile properties.

At the next machine ( the draw machine), undrawn tows from several

cans are collected in the form of a sheet and passed through a trough of

hot water to raise the temperature of polymer to 70 degrees C which is

the glass transition temperature of this polymer so that the polymer can

be drawn. In the next two zones, the polymer is drawn approximately 4

times and the actual draw or the pull takes place either in a steam

chamber or in a hot water trough. After the drawing is complete, each

filament has the required denier, and has all its sub microscopic chains

aligned parallel to the fibre axis, thereby improving the crystallinity of the

fibre structure and imparting certain strength.

Next step is to set the strength by annealing the filaments by passing

them under tension on several steam heated cylinders at temperatures

180 to 220 degrees C. Also the filaments may be shrunk on the first zone

of annealer by over feeding and imparting higher strength by stretching

2% or so on the final zone of the annealer. Next the fibre is quenched in

a hot water bath, then passed through a steam chest to again heat up the

tow to 100 degree C so that the crimping process which takes place in the

stuffer box proceeds smoothly and the crimps have a good stability.

Textile spin finish is applied either before crimping by kiss roll technique

or after crimping by a bank of hollow cone sprays mounted on both sides

of the tow. The next step is to set the crimps and dry the tow fully which

is carried out by laying the tow on a lattice which passes through a hot air

chamber at 85degree C or so.

The tow is guided to a cutter and the cut fibres are baled for dispatch. The

cutter is a reel having slots at intervals equal to the cut length desired

32 or 38 or 44 or 51mm. Each slot has a sharp stainless steel or tungsten

carbide blade placed in it. The tow is wound on a cutter reel, at one side of

the reel is a presser wheel which presses the tow on to the blades and

the tow is cut. The cut fibre falls down by gravity and is usually

partially opened by several air jets and finally the fibre is baled. Some,

balers have a preweighting arrangement which enables the baler to produce

all bales of a pre determined weight.

The bale is transported to a ware house where it is "matured" for a

minimum of 8/10 days before it is permitted to be dispatched to the

spinning mill.

3.3.1.2 PROBLEMS WHICH OCCUR DURING MANUFACTURE OF

POLYESTER STAPLE FIBRE

The manufacture of polyester fibre consists of 4 stps:

Polymerisation:Using PTA/DMT and MEG on either batch or

continuous polymerisation (cp_ - forming final polymer

Melt spinning :Here molten polymer is forced thorough spinnerette

holes to form undrawn filaments, to which spin finish is applied and

coiled in can

Drawings: in which several million undrawn filaments are drawn or

pulled approximately 4 times in 2 steps, annealed, quenched,

crimped and crimp set and final textile spin finish applied and

Cutting: in which the drawn crimped tow is cut to a desired

32/38/44/51 mm length and then baled to be transported to a

blend spinning mill.

3.3.2 SPECIALITY FIBRES IN POLYESTER

HIGH/LOW SHRINK FIBRES: The high shrink fibre shrinks upto 50%

at 100 degree C while that of low shrinkage is 1%. The high shrink

fibre enable fabrics with high density to be produced and is

particularly used in artificial leather and high density felt. Low

shrinkage fibre is recommended for air filters used in hot air,

furniture, shoes etc.

MICRO DENIER: Available in 0.5/0.7/0.8 deniers in cutlengths

32/38 mm. Ideal for high class shirts, suitings, ladies dress material

because of its exceptional soft feel. It is also available in siliconised

finish for pillows. To get the best results, it is suggested that the

blend be polyester rich and the reed/pick of the fabric be heavy.

FLAME RETARDANT: Has to be used by law in furnishings / curtains,

etc where a large number of people gather - like in cinema

theatres, buses, cars etc in Europe and USA. It is recommended for

curtains, seat covers, car mats, automotive interior, aircraft

interiors etc.

CATIONIC DYEABLE: Gives very brilliant shades with acid colours in

dyeing / printing. Ideal for ladies wear

EASY DYEABLE: Can be dyed with disperse Dyes @98 degrees C

without the need for HTHP equipment. Ideal for village handicrafts

etc.

LOW PILL: In 2 and 3 deniers, for suiting end use and knitwear

fibre with low tenacity of 3 to 3.5 gm/denier, so that pills which

forms during use fall away easily.

ANTIBACTERIAL:It is antibacterial throughout the wear life of the

garment inspite repeated washing. Suggested uses are underwears,

socks, sports, blankets and air conditioning filters

SUPER HIGH TENACITY: It is above 7 g/denier and it is mainly used

for sewing threads. Low dry heat shrinkage is also recommended

for this purpose. Standard denier recommended is 1.2 and today

0.8 is also available.

MODIFIED CROSS SECTION: In this there are TRILOBAL,

TRIANGULAR, FLAT, DOG BONE and HOLLOW FIBRES with single

and multiple hollows. Trilobal fibre gives good feel. Triangular fibre

gives excellent lustre. Flat and dog bone fibres are recommended

for furnishings, while hollow fibres are used as filling fibres in

pillows, quilts, beddings and padding. For pillows silicoised fibres is

required. Some fibre producers offer hollow fibre with built in

perfumes.

CONDUCTING FIBRE: This fibre has fine powder of stainless steel in

it to make fibre conductive. Recommended as carpets for computer

rooms.

LOW MELT FIBRE: It is a bi-component fibre with a modified

polyester on the surface which softens at low temperature like 110

degree C while the core is standard polyester polymer. This fibre is

used for binding non woven webs.

3.4 VALUE CHAIN

Fibres are transformed into yarn through spinning for natural and

blended yarns or drawing and texturising for synthetic filament yarn

production.Yarn is weaved into cloth. The process of fabric formation or

weaving comprises preparatory activities followed by actual weaving on

the loom. The preparatory process includes winding, warping, sizing,

drawing-in and denting. The sheets of yarn thus prepared are then

converted into fabric on the looms. This weaved cloth or fabric is stitched

into garments or sold in other forms of finished textiles. These stages of

manufacture have various levels of automation possible as an

improvement from the basic process.Textile fibres are predominantly of

two types - natural and manmade (see figure ‘Basic Threads’). Based on

the source, natural fibres, in turn, can be those derived from animals,

vegetables or minerals. On the other hand, manmade fibres are produced

in the fibre form by application of mainly chemical processes on the

naturally occurring substances (like hydrocarbons). Again, manmade

fibres fall in two categories - synthetics and cellulosics. Synthetic fibres

are primarily made from petrochemicals whereas cellulosics are mainly

regenerated wood pulp with chemical and physical treating. These fibres

can be either long, highly strong yarn called filament yarn (which is

oriented and fully drawn and is straight) or in staple form (much smaller

in length and crimpy like natural fibres). Filament yarns are woven or

knitted as they are. They are also woven into fabrics of textured yarn by

combining with other types of filament yarns, twisting yarns and texturing

in accordance with the aim of the product. The filament yarns are

processed into circular, triangular, oval, hollow and other cross-sections

that have even better properties. The staple fibres can be easily blended

with other types of fibres. They are woven into fabrics by blending with

cotton, wool and linen fibres to suit the aim of the product. The principal

manmade fibres include polyester, nylon, acrylic and viscose. Chemically,

polyester (or many esters) is primarily a family of polymers wherein the

monomers belong to the category “esters”. The most commonly used

polyester is the polymer of diglycol terephthalate and is called

polyethylene terephthalate (PET).Nylon is a group of polymers, which can

be classified as polyamides. Today several types of nylon are produced

with properties tuned to meet customer specifications. The most

commonly used ones are nylon-6 (which is manufactured from

caprolactam) and nylon-66 (made from adipic acid and hexamethylene

diamine). The special characteristics of manmade fibres combined with

availability and cost factors have seen an enormous increase in their use

in the global textile industry (see table ‘Features of Fibres’ for a

comparison of manmade fibres with cotton). Materials &

ProcessPolyester: Purified terephthalic acid (PTA) or Di-methyl

terephthalate (DMT) - both manufactured from paraxylene) - and

monoethylene glycol (MEG) - made from ethylene - are combined and

polymerised to form polyester chips. PTA has several advantages and is

more popular than DMT. The PET chips are melted and drawn to form

yarn and then cut to fibre; extruded into films or blown to yield bottles

(see chart ‘Refinery to Finery’). For generating fibres and yarns, the

molecules in polyester have to be oriented in a single direction (which

increases the strength and tenacity of the fibre). Drawing and texturising

is done to orient the partially oriented yarn (POY) - produced after the

PET melt passes through spinnerets - thereby yielding polyester filament

yarn (PFY). For generating polyester staple fibre (PSF), the initial POY is

cut in small parts and than provided a wavy shape so that it can be

blended with naturally crimpy natural fibres. Acrylic Fibres: Acrylic chips

are manufactured by polymerisation of acrylonitrile. Acrylonitrile is

manufactured from ammonia and propylene. Nylon: Caprolactam - the

raw material for nylon-6 chips - is manufactured using benzene and

ammonia. The conventional source of both these products is

hydrocarbons. Viscose fibres are cellulosic fibres made from purified

regenerated cellulose. The cellulose known as rayon grade wood pulp or

dissolving pulp is obtained from soft woods

4.0 World Fiber Scenario

4.1 INTRODUCTION

There is tremendous growth of fiber business in the last 50 years with lot of Changes in the market, technology, the processes etc. With advancement in technology Manmade fiber Grew more rapidly than natural fiber from nineties. Among the manmade fiber Polyester superseded the others from eighties. The filament growth became stronger than staple from mid eighties. The Business shifted from late nineties from USA /Europe to Asia specially China. India is also emerging. Lot of developments are being done in specialty fiber for getting higher margin. The manmade fibre industry will grow to 10.5 million tonnes by 2005 and to nearly 13.0 million tonnes by 2010.

GROWTH OF FIBER BUSSINESS IN LAST 50 YEARS

WORLD FIBRE CONSUMPTION Vs. POPULATION Year Total population(Bn) Total fibre Prod(Mn Tonnes)1950 2.56 9.41960 3.04 14.91970 3.71 21.81980 4.46 29.51990 5.28 40.82000 6.08 52.6

2003 6.34 57.7Table-1

Fiber business had increased by about 6 times in the last 50 years

.Among these the total manmade fibre consumption has grown by a

blooming 20.5 times leaving behind the natural fibre growth at a rate of

2.9times.

fibre business growth7

6

5

4

3

2

1

01950 1960 1970 1980

year

70

60

50

40

30

20

10

01990 2000 2003

Total population(Bn) Total fibre Prod(KTA)

World Fiber ConsumptionMn tonnes(Figs from 2004 onwards are projected figures)

Population ConsumptionYear Natural * Manmade TOTAL billion kg / capita

1950 7.72 1.68 9.40 2.56 3.70

1960 11.61 3.37 14.97 3.04 4.901965 13.35 10.68 24.03 4.09 5.90

1970 13.40 5.49 18.89 3.35 5.60

1975 13.48 8.39 21.88 3.71 5.901980 15.19 14.63 29.82 4.53 6.60

1981 15.23 14.30 29.53 4.46 6.60

1982 15.47 13.60 29.07 4.61 6.301983 15.71 14.85 30.56 4.69 6.50

1984 16.24 15.76 32.00 4.77 6.70

1985 17.73 16.26 33.99 4.85 7.001986 19.46 22.61 42.07 5.61 7.50

1987 19.60 23.59 43.19 5.69 7.60

1988 19.63 20.77 40.40 5.53 7.301989 19.67 20.48 40.15 5.54 7.40

1990 19.74 19.74 39.48 5.37 7.40

1991 19.99 28.30 48.29 5.92 8.201992 20.19 27.52 47.71 5.85 8.20

1993 20.24 24.68 44.92 5.77 7.80

1994 20.64 17.86 38.50 5.02 7.701995 20.74 16.89 37.63 4.97 7.60

1996 21.07 18.54 39.62 5.11 7.80

1997 21.27 29.40 50.67 6.00 8.401998 21.41 18.94 40.35 5.20 7.80

1999 21.46 19.38 40.84 5.28 7.70

2000 21.51 31.15 52.65 6.08 8.702001 22.01 31.60 53.60 6.15 8.70

2002 22.61 35.10 57.70 6.34 9.10

2003 22.75 33.46 56.21 6.23 9.00

Table-2

Population 2.5 timesTotal fibre 6.1 times

Natural fibre 2.9 timesManmade fibre 20.5 times

Kg / Capita 2.4 timesTable-3

NATURAL Vs MANMADE FIBRES Natural *

Manmade

45.00

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00

YEAR

Remarkable Growth of Synthetic fiber is seen after after 1990 due to

relative stagnation in the field of growth of natural fibres natural fiber

production. The growth rate of natural fibres is @ 0.4% whereas the

growth rate of manmade fibre is @ 4.7%.

G r o w t h a f te r 1 9 9 0 G r o w t h R a t e

N a t u r a l F i b r e 0 .40 %S y n th e t ic 4 .70 %

Projection for Man made fibre growth Double Exponential Smoothing: Manmade

year Forecast Lower Upper

2004 34.4290 26.4019 42.45602005 35.1542 23.8209 46.48762006 35.8795 21.0260 50.73312007 36.6048 18.1391 55.07052008 37.3301 15.2052 59.45502009 38.0553 12.2443 63.86642010 38.7806 9.2665 68.2947

The growth of synthetic fibre is expected to reacha 40 MnTonnes by 2010.

PROJECTION FOR NATURAL FIBRE GROWTH

Double Exponential Smoothing: Natural Fibres

Year Forecast Lower Upper

2004 22.9313 22.2845 23.57812005 23.2825 21.8053 24.75962006 23.6336 21.3206 25.94672007 23.9848 20.8347 27.13492008 24.3360 20.3485 28.32362009 24.6872 19.8620 29.51242010 25.0384 19.3754 30.7013

Growth of natural fibre is sluggish it is expected to reach 25 Mn Tonnes by 2010.

Mn Tonnes manmade cotton/wool/silk

1950 1.7 26.71960 3.4 42.61970 5.5 54.41980 14.6 68.21990 19.7 87.42000 31.1 107.42003 33.5 113.5

2010 38.8 129.9Table-4 Consumption of fibres from 1950,fig from 2004 are estimated

cotton/wool/silk WORLD CONSUMPTION OF FIBRESmanmade

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

1950 1960 1970 1980 1990 2000 2003 2010

Y E A R

Manmade fibers accounted for 35.10 million tonnes (+4.9%), comprising a 55.8% market share. Cotton, wool and silk declined by 0.6% to 22.61 million tonnes Among The Synthetic fibers Growth of polyester is Phenomenal .Polyester

have grown by 14 times while acrylic and polyamide fibres have grown by 2

times and 7 times respectively.

Growth 1970 to 2003 Polyester 14 timesPolyamide 2 times

Acrylic 3 timesTotal 7 times

Table-5

World Production of Synthetic Fibers in Mn Tonnes Polyester Polyamide Acrylics Others TOTAL Polyester Polyamide Acrylics Others

1970 34% 40% 21% 5% 4.809 1.64 1.92 1.01 0.241975 45% 33% 19% 3% 7.461 3.36 2.46 1.42 0.221980 47% 30% 19% 4% 10.779 5.07 3.23 2.05 0.431985 50% 26% 18% 6% 13.025 6.51 3.39 2.34 0.781986 50% 26% 18% 6% 13.645 6.82 3.55 2.46 0.821987 52% 25% 17% 6% 14.578 7.58 3.64 2.48 0.871988 53% 25% 16% 6% 15.172 8.04 3.79 2.43 0.911989 54% 24% 15% 7% 15.602 8.43 3.74 2.34 1.091990 53% 24% 14% 9% 16.191 8.58 3.89 2.27 1.461991 54% 22% 14% 10% 16.814 9.08 3.70 2.35 1.681992 56% 21% 13% 10% 17.693 9.91 3.72 2.30 1.771993 57% 20% 13% 10% 18.022 10.27 3.60 2.34 1.801994 58% 18% 13% 11% 19.779 11.47 3.56 2.57 2.181995 60% 19% 12% 9% 20.621 12.37 3.92 2.47 1.861996 61% 18% 12% 9% 21.81 13.30 3.93 2.62 1.961997 63% 16% 11% 10% 24.644 15.53 3.94 2.71 2.461998 65% 15% 10% 10% 25.521 16.59 3.83 2.55 2.551999 66% 15% 9% 10% 26.821 17.70 4.02 2.41 2.682000 66% 14% 9% 11% 28.389 18.74 3.97 2.56 3.122001 67% 13% 9% 11% 28.934 19.39 3.76 2.60 3.182002 68% 13% 9% 10% 30.694 20.87 3.99 2.76 3.072003 69% 12% 8% 10% 32.175 22.20 3.86 2.57 3.222004 70% 12% 8% 10% 33.29 23.39 3.91 2.58 3.412005 71% 11% 7% 10% 34.71 24.64 3.92 2.60 3.552006 72% 11% 7% 10% 36.13 25.88 3.94 2.62 3.692007 72% 11% 7% 10% 37.55 27.13 3.95 2.64 3.832008 73% 10% 7% 10% 38.97 28.38 3.96 2.66 3.972009 73% 10% 7% 10% 40.39 29.62 3.98 2.68 4.11

2010 74% 10% 6% 10% 41.81 30.87 3.99 2.70 4.25Source:fibre year 2003-2004 -saurer Table-6

Figures from 2004 onwards are estimated

Growth of different fibre

35000

30000

25000

20000

15000

10000

5000

0

Polyester 1970 1975PolyamideAcrylicothersTotal

1980 1985 1990

year

1995 2000 2003

% Vol of different fibre of total synthetic fibre prodn

80

70

60

50

40

30

20

10

0

1970 1975PolyesterPolyamideAcrylicothers

1980 1985 1990

year1995 2000 2003

Polyester superseeds other fibersShare of Polyester increased from 34% to

70 % from 1970 to 2003 where as share of Polyamide decreased from 40 %

to 12 % growth of wool and silk is almost negligible.

DoOthesrtMc Fiber Shares

Similar Growth of Polyester is sounded in India.Globally, Polyester’s share is

up from 27% in 1995 to 40% in 2001.In India, Polyester’s share up from

18% in FY96 to 31% in FY02. PRODN OF FIBRE IN INDIA

FY96 FY97 FY98 FY99 FY00 FY01 FY02

Polyester 633 826 1088 1228 1374 1417 1457

Cotton 2,521 2,764 2,662 2,839 3,066 2,890 2,907an-made

fibers 396 386 393 357 378 395 395Table - 7

100 %

80 %

60 %

40 %

20 %

0 %

F Y 9 6 F Y 9 7 F Y 9 8 F Y 9 9 F Y 0 0 F Y 0 1 F Y 0 2

Source : ASFI Handbook of Statistics, 200001 & October, 2001 report. CRIS INFAC Ernst & Young compilation

4.2 WORLD FIBER DYNAMICS

WORLD FIBER CONSUMPTION PATTERN

Country 1980 1985 1990 1995 2000 2004

Developing countries

USA 20.9 22.2 25.9 30.9 33 33.9

EU(15 COUNTRIES) 15.4 15 18 19.5 23 23.5

Japan 16.8 17.7 21.8 23.4 26.2 27

RUSSIA 14.7 14.6 14 7.5 10 10.5

Total 14.1 13.9 14.1 7.6 10.5 11

Developing countries

India 2.26 2.44 2.91 3.63 4.3 5

China 4 5 5.5 6 6.5 8

East asia-s-e asia 3.5 3.6 4.7 5.5 6.3 6.7

World 6.8 6.8 7.7 7.7 8.5 8.6

Table -8

Very High Growth of manmade fibers is forecasted is forecasted in the

160

140

120

100 O t h e r S y n t h e t i c

P o l y e s t e r80 C e l l u l o s i c

60 N a t u r a l

40

20

0 1970 1980 1990 2000 2010 2020 2030 2040 2050

SOURCE -PCI-2004

coming years

Growth of Staple and filament

From mid eighties Filament developed stronger than Staple fibre.

Annual growth of Filament showed a growth rate of- 6%, and annual

growth of Staple fibres showed a growth rate of - 1.4% , Natural fibres on

the other hand showed a meager growth rate of- 0.5 % , and over all

synthetic growth stood at-2.8 % .

Favorable manufacturing cost, technological progress , outstanding yarn

properties helped Filament to capture the staple market.

FILAMENT VS STAPLE

4.3.3 POLYESTER

POLYESTER

Year Forecast Lower Upper

2004 23.3879 22.4197 24.35612005 24.6352 23.3281 25.94222006 25.8824 24.2116 27.55322007 27.1297 25.0834 29.17592008 28.3769 25.9490 30.80482009 29.6241 26.8109 32.43742010 30.8714 27.6704 34.0724

Double Exponential Smoothing for Polyester

35 Actual

Predicted

Forecast

Actual

25 PredictedForecast

Smoothing Constants15

Alpha (level): 0.810Gamma (trend): 0.546

MAPE: 3.88964

5 MAD: 0.39520MSD: 0.25480

1980 1990 2000 2010

year

Polyester growth in 2003 is 7.2 % of total volume of 22.63 million MT.

Filament growth in 2003 is 7.6 % of total volume of 12.87 million MT.

Staple growth in 2003 is 6.6 % % of total volume of 9.39 million MT.

Maximum growth seen in 2003 is in China, Pakistan, Saudi Arabia. Asia

now account for a 83 % share of the world Polyester production. America,

Europe farther lost the ground to Asian countries with only exception

being Turkey. Continuous growth in polyester is predicted and

consumption is predicted to reach 30.8 million MT by 2010.

Staple Vs. Filament in Polyester

Polyester Consumption

Present breakup of

polyester

consumption

Ind Yarn33%

Tex Yarn38%

Staple29%

Staple

Tex Yarn

Ind Yarn

Top 3 Producing Countries

PFY 2003 % of world 2000 % of world 1995 % of worldPR China 5.741 44,6% 3.152 29,5% 1.022 15,7%Taiwan 1.555 12,1% 1.525 14,3% 1.225 18,8%

South Korea 1.28 9,9% 1.517 14,2% 947 14,5%TOTAL 8.576 66,7% 6.194 58,0% 3.194 49,0%

Unit: ‘000 tonnesPSF 2003 % of world 2000 % of world 1995 % of world

PR China 3.591 38,2% 1.815 22,5% 922 16,5%Taiwan 875 9,3% 932 11,6% 753 13,5%

U.S. 855 9,1% 1.041 12,9% 1.039 18,6%TOTAL 5.321 56,7% 3.788 47,0% 2.714 48,6%

Table-14

China, Taiwan and South Korea are the largest producers for both PSF and

PFY. The Chinese produce 44.6% and 38.2% of the world PFY and PSF

production respectively.

Table -15

World Production of Manmade Fibers

mill. tonnes 1995 1996 1997 1998 1999 2000 2001 2002 2003 CARG%PR China 3.2 3.5 4.3 5.2 5.8 6.7 8.2 9.9 11.7 15%

GROWTH% 9% 23% 21% 12% 16% 22% 21% 18%U.S. 4.2 4.2 4.4 4.3 4.1 4.2 3.6 3.8 3.8 -1%

GROWTH% 0% 5% -2% -5% 2% -14% 6% 0%Taiwan 2.6 2.7 3.1 3.3 3.1 3.2 3.1 3.2 3.2 2%

GROWTH% 4% 15% 6% -6% 3% -3% 3% 0%South Korea 1.9 2.1 2.5 2.5 2.7 2.8 2.4 2.3 2.2 2%

GROWTH% 11% 19% 0% 8% 4% -14% -4% -4%India 1 1.2 1.5 1.6 1.8 1.9 1.9 2 2 8%

GROWTH% 20% 25% 7% 13% 6% 0% 5% 0%Indonesia 0.9 1 1.1 1.1 1.2 1.4 1.5 1.4 1.4 5%

GROWTH% 11% 10% 0% 9% 17% 7% -7% 0%Japan 1.7 1.7 1.8 1.7 1.5 1.5 1.5 1.3 1.2 -4%

GROWTH% 0% 6% -6% -12% 0% 0% -13% -8%SUBTOTAL 15.5 16.4 18.7 19.7 20.3 21.7 22.1 23.9 25.6 6%ROW 8.1 8.3 8.8 8.6 9.1 9.4 9.5 9.6 9.6 2%

TOTAL 23.6 24.7 27.5 28.3 29.4 31.1 31.6 33.5 35.1 5%

4.3.3.1 BIGGEST PLAYERS OF POLYESTER

TABLE-16

FILAMENT AND STAPLE Taking capacities for filament and staple together for all their various plants and JVs across the world, the largest polyester fibre producers in 2003 (in '000 tons) are as follows.

1 NAN YA 975 (in Taiwan, USA)2 TUNTEX/XIANG LU 925 (in Taiwan, Thailand, China)3 RELIANCE 890 (in India)4 FAR EASTERN TEXTILE 708 (in Taiwan, China)5 HUVIS 653 (in Korea, Indonesia)6 TEIJIN 652 (in Japan, USA, Mexico, Germany,Indonesia, Thailand)7 YIZHENG 630 (in China - part of Sinopec)8 HUALON 567 (in Taiwan, Malaysia)9 SINOPEC 512 (in China - excl. Yizheng)10 KOSA 508 (in USA, Mexico, Germany)

Source: PCI Fibres & Raw Materials

Table-17 POLYESTER FILAMENT YARN

Taking just polyester filament yarn, the list for 2003 (in '000 tons) is as follows

1. NAN YA 575 (all textile filament)2. HUALON 513 (all textile filament)3. TUNTEX 450 (all textile filament)4. RELIANCE 434 (all textile filament)5. FAR EASTERN TEXTILE6. ZHEJIANG HENGYI 7. SHAOXING YUANDONG 7. ZHEJIANG TONGKUN 9. TEIJIN10. HYOSUNG

388 (83% textile filament*)340 (all textile filament; in China) 320 (all textile filament; in China) 320 (all textile filament; in China)306 (74% textile filament*)303 (65% textile filament*; in Korea)

*Among other filament products are included high tenacity industrial filament, textile monofil and filament spunbonded fabrics.

Source: PCI Fibres & Raw Materials

Table-18 POLYESTER STAPLE FIBER

And for polyester staple, the list for 2003 (in '000 tons) is as follows.

1. TUNTEX/XIANG LU 4752. SANFANGXIANG GROUP 460 (in China)3. RELIANCE 4564. YIZHENG 440 (part of Sinopec)5. WELLMAN 418 (in the USA and Ireland)6. NAN YA 4007. HUVIS 3858. TEIJIN 3469. SINOPEC 335 (excl. Yizheng)10. FAR EASTERN TEXTILE 32010. AKRA (DAK) 320 (in the USA and Mexico)

Source: PCI Fibres & Raw Materials

Table-19 GLOBAL RANKINGS - 2010

Taking capacity for filament and staple together for all their various plants and JVs across the world, the largest polyester fibre producers in 2010 (in '000 tons) are expected to be as follows.

1. SHAOXING YUANDONG2. YIZHENG3. RELIANCE4. NAN YA5. FAR EASTERN TEXTILE 6. TUNTEX/XIANG LU7. ZHEJIANG RONGSHENG 8. INDO-RAMA + ASSOC. 9. HUVIS10. SANFANGXIANG GROUP

1620 (in China)1540 (in China - part of Sinopec)

1350 (in India)1250 (in Taiwan, USA, Vietnam,

China) 1110 (in Taiwan, China)1025 (in Taiwan, Thailand, China)930 (in China)896 (in Indonesia, Thailand, India) 873 (in Korea, Indonesia, China)860 (in China)

Thus, of the top ten in 2003, only six are expected to remain in the top ten for 2010. Source: PCI Fibres & Raw Materials

Table-20 POLYESTER FILAMENT YARN - 2010

Taking just polyester filament yarn, the list for 2010 (in '000 tons) is expected to be as follows.1. SHAOXING YUANDONG2. RELIANCE3. NAN YA4. ZHEJIANG HENGYI5. YIZHENG6. FAR EASTERN TEXTILE7. ZHEJIANG RONGSHEN 8. ZHEJIANG TIANFENG 9. ZHEJIANG ZONGHENG 10. ZHEJIANG TONGKUN

920 (all textile filament)744 (all textile filament) 720 (all textile filament)660 (all textile filament; in China)640 (86% textile filament; part of Sinopec) 550 (82% textile filament)530 (all textile filament)530 (all textile filament; in China) 525 (all textile filament; in China) 500 (all textile filament; in China)

By 2010, all the biggest polyester filament producers except Reliance of India will befound in China, even if they also have operations elsewhere (such as Nan Ya andFar Eastern Textile). Source: PCI Fibres & Raw Materials

Table-21POLYESTER STAPLE FIBER - 2010

And for polyester staple, the list for 2010 (in '000 tons) is expected to be as follows.

1. YIZHENG2. SANFANGXIANG GROUP 3. SHAOXING YUANDONG 4. RELIANCE5. HUVIS6. TUNTEX/XIANG LU7. FAR EASTERN TEXTILE 8. INDO-RAMA + ASSOC. 9. NAN YA10. SINOPEC

900 (part of Sinopec)860700606605575560532530495 (excl. Yizheng)

By 2010, all the bigger polyester staple producers except possibly Reliance and Indo-Rama will be found in China, even if they also have operations elsewhere (such as Huvis, Tuntex, Far Eastern Textile and Nan Ya). Source: PCI Fibres & Raw Materials

4.3.3.2 POLYESTER STAPLE AND FILAMENT GLOBAL

CONSUMPTION PATTERN

25

20

15

Staple

10 Filament

5

0 1960 1970 1980 1990 2000 2010

4.3.3.3 STRONG GROWTH DRIVERS FOR POLYESTER IN INDIA

Quota removal by developed quantries (18% of the world current

production will be either from India or China) Big Boom in textil export.

Textile Exports to increase from current $13bn to $50bn by 2010.

Polyester based textile growth will increase with the increase in

population and change in demographic pattern and with the increase in

the percentage of consumer class. GDP growth rate rate is expected to be

more than 8 %. Polyester consumption is still low in India with a per-

capita consumption of 1.4 Kg whereas in Pakistan it is 3 kg, China 4 kg

and Indonesia 5 kg. There is a growing demand for non apparel

application worldwide 23% of global demand, whereas in India it is

negligible. Polyster is slowly replacing Cotton, Viscose and Acrylic fibres as

more and more polyester is used for its versatility and low price.

4.3.3.4 CHINESE POLY ESTER INDUSTRY STRUCTURE

CAN WE BEAT THEM ???

Chinese industry is dominated by more than 200 players which is

highly fragmented . Few companies are integrated -PTA-MEG-

Polyester and most of the companies rely on imports.

There are Several small capacity players-Government subsidized ,

without any viable cost or Quality model , these will call in for fierce

turbulence and may not survive in Post 2005 era.

Imbalance growth across the chain.(PX-PTA-MEG-PET)

MNC polyester manufacturer find it very difficult to

come to India as Reliance is a formidable force in Indian market

Several Chinese Manufacturers are going for Chinese M/C for High

IRR. They will fail in the long run.

Chinese Industry is Quantity driven where as Indian Industry are

quality driven.

4.4 FUTURE FIBER

Today’s challenge - eco friendly fiber !!!

Today’s main fibers in the world

- Cotton and polyester

- How eco-friendly they are ???

Cotton

•Massive land for growth

•Huge pesticide

•Massive water

•Very slow biodegradation

•Polyester

•Huge Fossil resource getting depleted

•Not bio degradable

Future fiber

• Raw material of finite resources

• Bio degradability of the product

• Eco-friendliness of the process

•Improved Quality

4.5.1 SHIFTING FOCUS OF POLYESTER TO ASIAN COUNTRIES

The last decade has seen a fundamental shift in the world polyester

production from the predominantly western part of the world to Asia. In

the 80’s the top ten polyester producers of the world had only two Asian

companies ETeijin and Toray, while the rest were all from USA/Western

countries.

Today seven Asian companies are firmly entrenched amongst the top ten

producers of the world - Nan Ya on the top followed By Tuntex, Teijin, Far

Eastern, Hualon, Reliance and Indo Rama. Firms like Hoechst, which was

a top ranking polyester company in the 90’s, is not in the current list. The

new entrants are Kosa (Koch-Sabanchi group), Tuntex, Hualon, Reliance

and Indo Rama who are now emerging as serious new global polyester

players.

China, Taiwan, Korea, India and Indonesia are key countries that have

surged ahead in the polyester market posting growth figures of 10%, in

spite of a major financial breakdown in the Asian economy in the year

1999. In 2000 the figure stood at 8.5%. On a longer term this figure is

expected to stabilize at 6.5~7%, against the world average of 5 ~ 5.5%

in decade (2000 -2010). Based on this, the estimated capacity of

polyester in Asia by the year 2010 is expected to touch 30 million tonnes.

China is expected to emerge as the biggest player in Asia leaving behind

Taiwan, Korea, and the other countries in the world. Its polyester

capacity will more than double in 10 years time, and it is expected to

occupy 33% of the Asian market share. Besides this, some new groups

will also emerge in Asia and dominate world polyester by way of mergers,

acquisitions and consolidation. Countries like Taiwan and Korea are likely

to shift capacities outside their ountries, while India is likely to face a

shortage of polyester in the face of increasing domestic demand. Growth of

polyester in other Asian countries like Indonesia, Malaysia, Thailand,

Philippines, Pakistan, and Vietnam will be slow.

4.6 CHINESE TEXTILE INDUSTRY: ITS STRENGTHS AND WEAKNESSES

When the Chinese textile industry is preparing to launch its conquest of the

world markets from 2005 when quotas on the international textile trade

are the lifted, it might be interesting to have a hurried look at the strengths

and weaknesses of that industry.

Just about a quarter century ago, the Chinese textile complex, according

to Mr Herwing Strolz, director general, International Textile Manufacturers

Federation, was in a shambles, unable to meet even the needs of its

growing population. In 1978, it had about 23 million spindles and

490,000 looms, most of them obsolete and in doubtful working condition.

Fibre consumption by its textile industry was about 2.66 million tonnes in

1975, just around 11 per cent of the total world consumption.

But by 2000, fibre consumption by the Chinese textile industry had risen to

about 13 million tonnes, about 25 per cent of the world total. Even after

scrapping, one million old spindles, its spinning capacity amounted to 35

million spindles in 2001, of which 20 per cent was less than 10 years old.

It had by then, nearly 700,000 rotors of which 60 per cent were less than

10 years old.

Modernisation of its weaving sector has been even more impressive. In

2003, it had 660,000 looms of which 12 per cent were shuttleless

(against none in 1978) and of them, more than 90 per cent were less

than 10 years old.

Thus by 2009 China had emerged as:

i) The world’s largest textile economy;

ii) it became the biggest exporters of textiles and clothing;

iii) it was the largest single producer of cotton and man-made fibres;

iv) its textile industry accounted for nearly 10 per cent of its GDP and 20

per cent of its industrial output; and

v) its textile industry accounted for 13 per cent of the workforce

employed by its manufacturing sector.

Despite all this wonderful progress, the Chinese textile industry is still

suffering from certain weaknesses such as:

i) Outdated and small man-made fibre manufacturing units;

ii) large obsolete production capacities still existing in the cotton weaving

sector;

iii) existence of certain loss-making units in the public sector; iv)

neglected finishing and printing sectors; and

v) low value addition of its textile production.

A question that is bound to arise here is: what is the strategy adopted by

the Chinese textile industry to achieve the present impressive growth?

China’s success in the global textile market, according to Mr Strolz, has

its roots in the early recognition that the development of its textile

complex had to start from where it was most competitive i.e. at the

apparel end of the pipeline. It was here that its low labour costs would

give it an unbeatable advantage for a long time to come, considering the

virtually non depletable reservoir of labour from the rural areas in future.

Once the take-off stage in apparel had been left behind, investments

would automatically be attracted into the capital intensive upstream

sectors, be it textiles or fibres.

Although the process from backwardness to bigness took only 25 years

when considering the size of the industry today, China had no instant

success when trade performance is taken as the yard stick. In fact, it was

only in July 1988, 10 years after the announcement of the Deng reforms

that in value terms, China’s apparel export caught up with the textiles.

After that, however, apparels performed the role that was intended for it.

Apparel exports grew by over 420 per cent in the 13 year period to 2001, as

against 140 per cent for textiles.

So storming has been the advance of the apparel sector that textiles

could not follow. In the big noise which is currently made about China’s

export performance, it is often forgotten that China is also one of the

leading textile importers of the world. The main reason for this lies in the

fact that many fabrics needed by its export -oriented apparel industry are

not manufactured in the country either at all, or in sufficient quantity and

quality Growing textile imports by China are partly the result of an

obsolete weaving industry in which shuttle loom is the dominant

technology and partly neglect of the finishing and printing sectors.

According to the Chinese customs statistics, only 4.3 per cent of textile

imports in 2001 was classified as general trade. The rest was processed

materials. China is aware that its future competitive strength in the world

market will depend essentially on the strengthing and diversifying of its

textile base. It might be interesting to note that China continues to

introduce new machinery in its textile industry at almost breakneck pace.

It is no surprise that textile machinery manufacturers all over the world

are looking at China as market with great potential. That is what causes

apprehensions in the minds of textile manufactures elsewhere in the

world, whether they will be able to survive in the new quota free era.

4.6.1 THE CHINA FACTOR

It has been widely observed by now that the country most critical to the

course of future cotton and textile trade developments is China. Even

though India and Turkey are acknowledged as serious players in this

segment the industry's watchful gaze is chiefly focused on China. It is

popularly being seen by industry specialists as a wild card which will

dictate terms and trends to the global textile market in the years to

come.

China sits snugly with the majority share of 25% of the entire world’s

textile market exports, while India lags far behind at a mere 5%. Given the

fact that India has about the same potential and resources as China for the

textile export market, it is important to look at the factors that impede its

growth in an otherwise promising scenario.

Amongst the key reasons for China’s higher productivity are its low cost-

high quality mass production, a favourable physical environment for

foreign companies, an optimistic work culture and a technology ‘imbibing

attitude- factors that are wanting in India. However, a comparison

between the two countries also shows that China’s weaknesses are

India’s strength. China’s drawback is essentially a people’s problem: the

local staff in the industry suffers from low educational background,

limited functional specialities and a lack of international mindset. On the

other hand, India has a talented local staff with an extremely high

education level, which also has the potential of moving up the

management hierarchy.

However, India has glaring infrastructure problems that cannot be

ignored. Its power supply remains poor and erratic at best. The cost of

capital, which is comparatively low in China, is high in India. This does

not allow the industry to implement rapid technological advances in

machinery and processes, most of which are completely obsolete.

Moreover, it also has a strong culture of trade unions, with strong political

affiliations that complicate business issues and retard productivity. The

discrepancy between the wages of labour and management are high in

India leading to considerable dissatisfaction and unrest. In contrast,

China enjoys a disciplined and dedicated workforce that has very little

disparities in the remunerations between its labour force and the

managerial class.

Funds for modernisation are extensively granted to the Chinese industry

while in India it is still lacking.

The infrastructure of any country is the basic foundation upon which it

stands. Or moves. India with a GDP growth suffers from a sluggish

growth rate, even as its neighbour China rears its head with an 8%

growth rate.

For a considerable period now lack of modernisation has been staring at the

face of the Indian industry, which banks primarily upon a labour

intensive approach. The textile industry is no exception and is replete

with obsolete machinery.

Industry heads voice the need for cheaper capital to be able to make

these much-required changes, and are not satisfied with the

government’s half-hearted efforts. There is also a significant lack of effort

in the areas of research and development pertaining to the textile

industry, something that has been addressed very seriously in countries

such as China.

The power available to Indian industries is inconsistent in quality due to high

levels of voltage fluctuation. Furthermore, frequent power cuts force

industries to invest heavily in self-generating power plants. Indian

industries also pay the same tariff rates for both peak and normal hours,

while in a country like China the tariff at normal hours costs much less.

Besides power, other infrastructure issues such as cost of capital is also

appreciably cheaper in China as compared to India, which pays very

steep interest on the much needed working capital. It has also to contend

with higher rates of import duties.

5.0 INDIA’S TEXTILES : SCENARIO

5.1 INTRODUCTION

Textile is one of India’s oldest industries and has a formidable

presence in the national economy in as much as it contributes to about 14

per cent of manufacturing value -addition, accounts for around one -third

of our gross export earnings and provides gainful employment to millions

of people. They include cotton and jute growers, artisans and weavers

who are engaged in the organised as well as decentralised and household

sectors spread across the entire country. The industry is largely foot-

loose and has a wide sectoral dispersal particularly in handloom and

powerloom sectors. It has a wide spectrum of fibres consisting of cotton,

jute, silk, wool, man-made and synthetic fibres as well as blends of one

or more fibres. It enjoys possibly the widest linkages, both forward and

backward, and contributes directly not only to the livelihood but also to

the empowerment of largely the weaker sections of the society living in

rural and semi-urban areas.

The growth of the industry over the years has been characterised by

expansion in dimension, changes in fibre-mix, adoption of heterogeneous

technology matrix and increase in availability of goods for home

consumption and exports. In the spinning segment, the spindleage

increased from about 21 million in 1981 to about 38million in 2003 which

is the second largest in the world after China and has a world share of

38%. The production of spun yarn has also increased accordingly from

about 1240 million kgs. in 1981-82 to about 3520 million kgs. in 2002-

03. The production of fabrics has also increased from 12300 million sq.

meters in 1981-82 to 36200 sq. million meters in 2002-03. The rapid

growth in the decentralised garment segment in the past decade or so

has added to the dimension of the textile industry. The garment segment

began initially as an export -oriented effort but it has grown in volume and

diversity and the export of ready made garments now accounts for over 40

per cent of the value of total textile exports. The value of production of

ready-made garments for domestic market is estimated to be three times

as much as for export market. The fibre-mix pattern has also

undergone changes due to improved availability of man-made fibres and a

shift in consumer preference towards this fibre. The ratio of cotton to man-

made fibre is now about 65:35. The fibre mix pattern of fabrics has also

undergone change and cotton-based fabrics which accounted for over 70

per cent of the total fabrics production till 1988, now accounts for about 42

per cent production. The remaining 58 per cent is contributed by blended

and 100 per cent non-cotton cloth.

The significant growth in textile industry so far has led to an increase in

the availibility of textile products for both home consumption and

exports. Thus, the per-capita availability of cloth has increased from17 sq.

meters in 1982 to about 31.24 sq. meters in 2003-04. Likewise, exports

of textile products have grown significantly from $ 5797 million in 1991-92

to $ 12501 million in 2002-03. The growth in exports further seems to rise

to up to $ 50000 by 2010.

5.3 PRODUCT DEVELOPMENT

The future growth, particularly in export markets, will come mainly

from exports of value -added items including made-ups and apparels. It

is, therefore, imperative that our industry must gear up to integrated

consumer tastes and preferences in their production and develop

marketing infrastructure so as to service both domestic and international

requirements timely and effectively. The industry can contribute towards

development of marketing infrastructure through their own association

and export promotion councils. The Government has set up seven

National Institute of Fashion Technology Centres providing skilled human

resources to the apparel and textile industry. Besides, the Government has

equipped certain Powerloom Service Centres, Weavers Service Centres

and Training Institutes. The industry can take help from these

organisations in meeting their design requirements. It has also been

decided to set up a National Design Centre for Handlooms.

5.4 INFORMATION TECHNOLOGY

The efforts to increase the competitive strength of the industry as a

whole will depend on how fast the industry can integrate various I.T.

solutions including ERP solutions, CAD/CAM and other I.T.-based tools for

improving the speed and quality of production, reducing time lag in

deliveries, marketing and incutting down overall time overrun. In fact,

countries like Japan and USA are adopting I.T. solutions like Quick

Response (ARS) which are reportedly capable of cutting down apparel

pipeline time substantially and thus effect significant savings in cost.

Some variants of these solutions may also be tried in our apparel sector

in particular so that we can compete with these advanced countries

successfully. I.T. solutions can easily be adopted by small and medium

units and these units have the added advantage of adaptability and

flexibility in production, which large units often do not have

5.5 JOINT VENTURES

It is important to note that the production environment in textiles all

over the world is undergoing changes. Countries are trying to

complement their own comparative advantage, whether in technology or

in raw materials or in finance, by forging joint ventures or production or

marketing tie-ups with other countries to increase their overall

competitive strength. The Indian textile industry may also like to explore

this route for enhancing comparative advantage and convert it into

competitive strength.

5.6 EXPORT.

Till the phasing out of the Multi Fibre Agreement (MFA) by the end

2004, the Government has made all efforts to streamline the textile quota

regime, so as to benefit the textile trade and industry. The new policy

seeks to achieve continuity and stability with competition. The policy has

also attempted to simplify procedures, ensure time-bound action in case of

apparels and encourage fast utilisation of quotas. The Policy also

attempts to give a boost to Technology Upgradation Fund Scheme (TUFS) by

linking with investments under Manufacturer’s Entitlement and New

Investment Entitlement.

5.7 TEXTILES IN THE NEW MILLENNIUM

Needless to say that the textile industry has several challenges ahead

and re-orientation of the industry, both organic and systemic, is required to

enhance its competitive strength and improve its global positioning in the

new millennium. In this effort, the Government’s initiative, some of which

have been outlined above, may not be sufficient. The industry including

the textile machinery sector and related organisations must supplement

these initiatives in a more proactive manner, so that the industry

achieves cost reduction, attains quantum jump in quality production

and improves delivery systems.

5.8 INDIAN TEXTILE INDUSTRY : A FUTURISTIC PROFILE

The Textile Sector in India ranks next only to Agriculture. It accounts

for 20 per cent of the country's industrial output and 30% of the foreign

exchange earnings. About 21 INDIAN TEXTILE INDUSTRY CONTRIBUTES TO -

per cent of the country's

work force is employed in

this sector. But presently, the

Indian textile industry stands

at the cross-roads. It is facing

challenges and

exciting opportunities at the

3% of GDP• 14% of total industrial production

• 21% of total work force• Employing around 35 million people

• 27% of gross export earnings • 10% of total excise revenue

Table-27

same time, following a focus thrust on this sector in the planning process,

economic liberalisation and globalisation of trade. It can either flourish or

perish.

5.9 MAN-MADE FIBRE

Till the early seventies, the Indian man-made fibre textile industry was

miniscular. Fibre flexibility introduced by the Government's Textile Policy

of 1985 has, however, helped man-made fibres to grow rapidly in the last

two decades. Falling input prices and ease of maintenance have

popularised man-made and blended fabrics among the common masses.

They are also increasingly being used in industrial applications. India's

man-made textile industry is capable of expansion in terms of raw

material base and yarn and fabric conversion facilities. Today, it accounts

for almost 32 per cent of the fibre/yarn base. Given the Indian

advantages of lower production costs, dominance of medium-sized units

capable of catering to a small lot and volume orders, large domestic

consumption which could neutralise adverse effects of overseas demand

fluctuations and decline in production in the developed countries, the

Indian synthetic textile producers have an edge. This will release more

cotton for value-added exports.

5.10 SPINNING AND WEAVING

With 39.02 million spindles and 4.69 lakh rotors, India has almost 19

per cent of the world spindlage. The spinning sector has kept itself

healthy through timely investments and technology upgradation.

Consequently, it is doing excellently in exports Since 1947, the mill the

powerlooms has grown from 24,000 to almost 16.92 lakh. A Technology

Upgradation Fund Scheme is being mounted during the Ninth Plan.

Upgrading technology level in the weaving sector by installing shuttleless

or automatic looms and related accessories would ensure productivity

enhancement and production of defect-free fabrics with value addition.

5.11 PROCESSING

Processing and finishing are the weakest links in the Indian textile

industry today. A conscious drive has been initiated to upgrade it by

incentives in investment to the high-tech processing machinery,

strengthening testing infrastructure by upgrading or setting up new

laboratories, developing natural and vegetable dyes for commercial scale

application, providing support for eco-friendly processing and other such

measures. This would help improve the garment quality, contributing to

value addition and higher unit value realisation in exports and hence a

larger market share.

5.12 INDIA'S POSITION IN WORLD TEXTILE ECONOMY

The Indian textile industry has a significant presence in the world textile

economy by virtue of its contribution to world textile capacity and world

production of textile fibre/yarn :-

India's position in World textile economy. It contributes about 23% to the

world spindleage and about 6% to the world rotorage and has second

highest spindleage in the world after China. It has the highest loomage

(including handlooms) in the world and contributes 61% to the world

loomage. (Though this position cannot be considered as a 'strength'

because in quantum terms we may have the highest loomage in the

world, in terms of high-tech shuttleless looms, our contribution is only

about 2.8% to the world loomage.) It contributes about 12% to the world

production of textile fibres and yarns (including jute). It is the largest

producer of Jute, second largest producer of silk and cellulosic fibre /

yarn, third largest producer of cotton and fifth largest producer of

synthetic fibres/yarns.

5.13 COST COMPETITIVENESS OF TEXTILE INDUSTRY

India's position in comparison with other countries

India has inherent strengths in terms of strong multi-fibre raw material

base, low cost of labour, intellectual capital, dynamic and vibrant

entrepreneurship. It is diluted to a great extent due to severe disadvantages

suffered by the Indian textile industry in certain other areas affecting its

productivity, quality and cost competitiveness.The main disadvantaged

factors are high interest cost, high power tariff, structural anomalies and

technological obsolescence which is pervading all segments of the industry.

As per ITMF study for the year 2003 of seven countries , i.e., Brazil, China,

India, Italy, Korea, Turkey and USA. Power cost works out to be the highest

in India in comparison to other countries. The power cost in total cost of

spinning, weaving and knitting is in the range of 3% to 13%, while in India it

is in the range of 6% to 17% except woven textured yarn Fabric in which

case Italy is highest with 28%. -source "compendium of International Textile

Statistics - 2004"I.

5.14 CONSUMER BUYING BEHAVIOUR

The success of any product now lies in customizing it for the Indian

market and working closely with manufacturing facilities and research

centers in India. Now, Reliance CDMA phones come with the Indian

flavour- unique polyphonic rings and colour displays ; the Samsung

stables have the Metallica and Woofer series of TVs revolving around the

song and dance routines of Hindi film industry; and Electrolux Kelvinator

with their ‘Hindi-speaking’ washing machine catering to the Indian

housewife.

The Indian market does lap up a foreign tag but it does so only with some

level of customization. The realization that Indians are different from the

Americans and the Europeans made the multinationals rework their

marketing strategy. From introducing their products in a hurry without

bothering to gauge whether the Indian consumers liked them or not, they

had to graduate to develop products specially made for the Indians.

These localized products are targeting the Indian consumers not as a single

entity but also focusing on the distinctly different preferences of the urban,

small town and rural Indians.

•During 2001

-Per capita purchase of textiles was 19 meters

-In purchases of Man made /Blended and Mixed fabric

•Overall share of Man made /Blended and Mixed fabric stands at 58%

•Urban India share of Man made /Blended and Mixed fab50% , Rural

India share of Man made /Blended and Mixed fab60%

-Purchases of Cotton Fabric

•Overall share in purchases of Cotton Fabric- 40%

•Urban India purchases of Cotton Fabric- 44% Rural India purchases of

Cotton Fabric-38%

Regional Buying Trend

•Man made / Blended and Mixed

-Over 50% of the Man made / Blended and Mixed fabric purchased by

North and West

-West leads in purchases of Man made fabric

-North leads in purchases of Blended/Mixed fabric

•Cotton Fabric

-Maximum cotton purchases by Eastern region: 40%

•Silk

-Maximum silk purchases by Southern region: 57%

Per Capita Purchase -

Meters-Table28

Urban Rural All India

Cotton 11 6 7

% Share 44 38 40

Man-made 3 2 2

% Share 12 11 11

Blended / mixed 10 8 9

% Share 41 50 47

Pure silk 1 0 0

% Share 3 1 1

Woollen 0 0 0

% Share 1 0 0

All Textiles 24 17 19

Source : Textile Compendium 2009

Region Wise Fabric Purchase -2008Billion Meters -Table29

North South East West Central TotalCotton 1.4 1.8 3.0 1.1 0.3 7.7

% Share 18 24 40 14 4Man Made 0.5 0.5 0.3 0.7 0.1 2.1

% Share 22 26 16 32 4Blended / Mixed 3.0 2.1 1.3 1.8 0.9 9.0

% Share 33 23 14 20 10Pure Silk 0.0 0.2 0.1 0.0 0.0 0.3

% Share 13 57 18 8 4Woollen 0.0 0.0 0.0 0.0 0.0 0.1

% Share 37 4 37 10 12

Grand Total 4.9 4.6 4.7 3.6 1.3 19.2% Share 26 24 25 19 7

Source : Textile Compendium 2009

5.15 SWOT ANALYSIS

5.15.1 SPINNING SECTOR - SWOT ANALYSIS

Strength

• Large production base

• Skilled Man Power

• Domestic Orientation

• Raw material available at

economical or international prices

• Finer count capability

• Major investments in Spindles

Weakness

• High cost base

• 29% either closed or obsolete which

need replacement

• With 21% spindle share

production share around 10%

Opportunity

• Experience of exports

• Locational advantage to cater to

fabric producing markets

• Wide product range

• Short production cycles

• End of quota system

Threats

• Large Chinese Capacity expansion

both for domestic and export markets

• High growth in filaments ?

• Rationalization of excise duty ??

5.15.2 WEAVING SECTOR - SWOT ANALYSIS

Strength

• Large domestic market

• Production domestic oriented

• Cheap conversion cost in case of

the Decentralized sector

Weakness

• Demise of organised sector

• Poor quality and lack of export

culture

• Production of large length of defect

free fabric

• Fragmented production base

• Lack of knowledge on fashion trends

Opportunity

• Growing domestic demand

• Reduction in machinery ID to 5%

• Soft loans under TUFS

• Investments in Garment Sector

• Outsourcing of production by brand

leaders

Threats

• Lowering of tariffs

• End of quota system

• Large Chinese Capacity expansion

both for domestic and export markets

5.15.3 PROCESSING SECTOR- SWOT ANALYSIS

Strength

•Apart from weaving , this is another major weak link

•Acts as a deterrent to producing quality processed fabrics to produce

quality garments

•Opportunity

-Customs duty on machinery imports at 5% -

Soft loans under TUFS

Table-30

Table-31

Table-32

6.0 INDIAN FIBRE INDUSTRY 6.1 INDIA'S SYNTHETIC AND RAYON TEXTILE INDUSTRY

India offers the global buyer the entire range of polyester, rayon, nylon,

acrylic and blended textile items of high quality at competitive prices.

And, its uniqueness is that it is able to supply both high and low-end

textile items either in small or large volumes. So, whatever may be the

requirements of the foreign buyer, India is a dependable source of

supply.

The Synthetic industry in the country has a largely self-sufficient raw

material production base, innovative professionals, state-of-the -art plants

and machinery, and an abundance of creative personnel coming up

constantly with new effects, finishes and designs. India has thus made a

mark in the global market as a supplier of a wide range and variety of

synthetic and rayon textiles.

At present, India exports synthetic and blended textile yarns worth nearly

US $ 12501.52 US$ million annually. In these markets, Indian items

compete with products of textile giants like Japan, Korea and Taiwan and

outpace them. The leading markets for Indian synthetic textiles today

are the U.A.E., U.K., Italy, Spain, Turkey, U.S.A., Belgium, Germany and

France.

The annual fabric production in the country is around 41973 million Sq

metres, of which 5876 million Sq metres are blended fabrics.

The range of polyester, rayon, nylon and blended fabrics offered by India

is truly fabulous. The main varieties in polyester filament fabrics

categories are Georgette, Chiffon, Crepe, Tafetta, Cambric, Crepe-de-

chine, Voile, Habutae, Palacs, Palace crinkle, Gingham, Dobby, Velvet,

Twill and Jersey. Polyester cotton and polyester viscose blended fabrics

account for the bulk of the production and export of blended fabrics in

India. The polyester blended items include sheeting, shirting, twill and

drill. Suitings and shirtings dominate the polyester-viscose blended

fabrics category.

There is an equally exotic range of high quality decor fabrics offered by

India. Overseas buyers looking for the trendiest designs, non-fading

shades and durability can source their requirements of blankets,

bedspreads, curtains, cushion covers, upholstery, tablecloth,

counterpanes, bath mats, tie-backs, etc., from the huge collection of

Indian home textiles with each item standing out for its finish, texture,

print and shade.

These items are woven from the finest yarns of 100% polyester, acrylic,

polyester-cotton, silk-polyester, polyester-viscose, viscose spun and

viscose-cotton in plain, dyed, printed and embroidered.

Besides wholly synthetic and also blended fabrics, the industry offers a

large range of made-up items like scarves/stoles/dupattas and odhanies

in exotic shades, intricate patterns and magical finishes, exotic dyed,

printed and embroidered dupattas and odhanies in metallic stripes,

sequins and pearl and bead works which are in great demand in the Arab

world as a specialty of India. Indian acrylic knitwear is also popular in

West Asia.

6.1.2 GROWING SHARE OF SYNTHETIC TEXTILES

It is expected that the already substantial consumption of synthetic

fibre in the Indian textile industry will reach global levels in the next

few years. This projection is based on certain factors like the large

expansion taking place in the production of synthetic fibre and yarn,

and the subsequent economies of scale being attained,

acorresponding expansion in production in the user-sectors, rising

per capita consumption of cloth, limitations in growth in production

of natural fibres, and greater dependence on synthetic textiles to

meet the rising demand. These inherent advantages of the Indian

synthetic textiles industry will further accelerate its growth rate in

the coming years.

6.1.3 UNIQUE DVANTAGES

The Indian synthetic and rayon industry has certain unique advantages

which will go a long way in helping it to make a mark in the global

market. The industry is self-sufficient and vertically integrated.

Moreover, due to its centuries-old textile tradition, India is adept in the art

and science of producing exquisite textiles. Besides, the diversified,

small lot production situation prevalent in India makes it capable of

coping better with changes in global fashion demand, and is well-oriented

to execute small volume orders within a short span of time. The industry

is of course equally geared to execute high volume orders. With its range

of products popular among the middle and the low-end consumers, India

is capable of catering to all segments of the international market.

6.1.4 PRODUCTION SCENARIO

The growth rate of man-made fibres in India has been impressive (from

498 million kgs in 1995-96 to 2072 million kgs in 2002-2003). The

production of synthetic yarn and fabric shows the growth rate at 75% and

60% respectively. In fact, production of all Synthetic and Rayon textile

items (fibre, yarn, raw material) has been going up steadily over many

years.

The spindleage is expected to reach 40 million in the next one year, a

development which will enable the industry to produce over 3400 million

kgs of yarn if the capacity utilization can reach 85% - which is the

international norm. Since cotton production is more or less stagnant, and

production of man-made fibres is rising, production of cotton yarn and

non-cotton spun/blended yarns is expected to be equal in a year's time.

As the importance of man-made fibre textiles is increasing, the

production capacity of raw materials for the man-made fibre industry is

going up with the current estimated production of around 4.4 lakh tonnes

per annum.

The Indian Synthetic and Rayon Textile industry produces the complete

range of fibre and yarn for different end-uses. Raw materials like DMT,

Caprolactum, PTA, MEG, Acrylonitrile and rayon grade wood pulp are also

produced indigenously. In the cellulosic segement, India is producing

viscose filament yarn, viscose staple fibre/viscose type yarn and modal

fibre. the synthetic fibre/yarn produced in India include nylon filament

yarn, polyester filament yarn, polypropylene filament yarn, nylon tyre

yarn, acrylic staple fibre, polypropylene staple fibre and spandex fibre.

6.1.5 PRODUCTION OF FABRICS

India manufactures around 41973 million sq. mtrs. of fabrics annually for

clothing and furnishing, upholstery and household use. These fabrics

consist of all varieties, including synthetic filament fabrics and

blended/mixed fabrics. The main fabric varieties manufactured in India

at present are polyester filament, viscose filament, polyester-cotton,

polyester-viscose, viscose spun, polyester spun and acrylic spun.

6.1.6 EXOTIC MADE-UP ITEMS

India also produces an exotic range of made-up items like scarves, stoles,

dupattas, odhanies, shawls, cushion covers etc., in a wide variety of

finishes like dyed, printed, embroidered, sequined, beaded and hand-

painted.

6.1.7 TREMENDOUS SCOPE FOR EXPANSION

India has tremendous scope for further expansion of its exports of

synthetic and rayon textiles in the coming years. The country has core

competence in textiles and will remain competitive in the world markets

for the next 20-30 years. India enjoys substantial cost advantages,

especially in the area of labour. The global scene too is favourable to

India at the moment as countries in Europe, Japan, Korea, etc., are

moving up the market, or vacating some areas in production of synthetics

which leaves a much larger field open to expand our exports.

6.1.8 WORLD CLASS PLANTS

India can boast of world-class plants to produce synthetic fibres and

yarns and has acquired self-sufficiency in all raw materials. India has also

invested heavily in the spinning sector and is, therefore, in a position to

produce and supply quality yarns to the world.

6.1.9 EXPORTS OF SYNTHETIC AND RAYON TEXTILES

Exports is expected to increase to US$50 Bn from present US$12.4 Bn by

2010.

Highlights of Exports of Synthetic and Rayon Textiles in

April/January-2003-2004 Table -36

QUANTITY

FIBRE/YARN

Viscose Staple 4.42

PSF 35.67

ASF 9.12

Pp 0.25

Viscose Filament Yarn 2.85

Nylon Filament yarn 15.25

Polyester Filament Yarn 68.19

PP Yarn 0.0

Source: DIGCS,Calcutta

6.2 INDIAN PSF CAPACITIES

YEAR PSF PRODUCERS CAPACITY(TPA))

Ahemedabad Mfg. And Calico Ptg.co. Ltd(Estd -1974) 7968

Terene Fibres India Ltd(Estd -1965) 36000

1975 Indian Organic Chemicals Ltd.(Estd -1973) 20000

Swadeshi Polytex Ltd.(Estd -1973) 14000

JK Synthetics ltd.(Estd -1972) 16000

Ahemedabad Mfg. And Calico Ptg.co. Ltd(Estd -1974) 7968

Terene Fibres India Ltd(Estd -1965) 36000

1985 Indian Organic Chemicals Ltd.(Estd -1973) 20000

Swadeshi Polytex Ltd.(Estd -1973) 14000

JK Synthetics ltd.(Estd -1972) 16000

Ahemedabad Mfg. And Calico Ptg.co. Ltd(Estd -1974) 7968

Terene Fibres India Ltd(Estd -1965) 36000

Indian Organic Chemicals Ltd.(Estd -1973) 20000

Swadeshi Polytex Ltd.(Estd -1973) 14000

JK Synthetics ltd.(Estd -1972) 16000

1995 Reliance Industries Ltd(Estd -1986) 65000

Orissa Synthetics Limited.(Estd-1987) 17172

India Polyfibers Ltd.(Estd-1987) 21000

Bongaigaon Refinery & Petrochemicals Ltd.(Estd -1988) 30000

JCT Fibers Ltd.(Estd -1989) 37000

Indorama Synthetics (I) Ltd (1995) 30000

Arora Fibers Ltd.Estd 1995)(by recycling waste) 7200

Ahemedabad Mfg. And Calico Ptg.co. Ltd(Estd -1974) 7968

Indian Organic Chemicals Ltd.(Estd -1973) 20000

Swadeshi Polytex Ltd.(Estd -1973) 14000

JK Synthetics ltd.(Estd -1972) 16000

Reliance Industries Ltd(Estd -1986) 453000

2008 Orissa Synthetics Limited.

JCT Fibers Ltd.

India Polyfibers Ltd.

31000 31000RIL

81000 Acquired 8100038000 Sites 38000

Bongaigaon Refinery & Petrochemicals Ltd. 30000

Indorama Synthetics (I) Ltd (1995) 140000

Arora Fibers Ltd.Estd 1995)(by recycling waste) 7200

Viral Filaments(Estd 1996)(By-Recycling waste) 5000Table-37

Producers of PSF in India from the beginning of the industry till date.Industries shown in subtle colour are closed down.

6.3 Domestic Consumption of PSF

PSF SUPPLY DEMAND 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

PSF

consumptio 120.812 131.342 153.316 212.094 254.378 258.978 326.033 457.203 523.527 514.25 558.491 560.465 578.622 671.4213 739.4411 810.785 895.23n in KTA

PSF Imports

in KTA 10.476 8.369 9.106 19.137 44.306 40.433 38.564 29.766 17.444 13.83 21.309 26.947 25.812 20.7011 22.3801 24.059 25.738

PSF Exports

in KTA 23.871 13.185 17.313 7.105 11.002 8.889 8.229 7.966 16.587 51.065 29.238 17.902 29.32 28.0713 28.8741 29.6769 30.48

PSF PRODNIN KTA 134.207 136.158 161.523 200.062 221.074 227.434 295.698 438.616 522.67 551.485 566.415 551.42 582.13 608 608 608 608

DEFICIT (70.79) (137.94) (208.40) (291.97)

Table-38

PSF consumption in KTA

PSF PRODN IN KTA PSF SUPPLY-DEMANDDEFICIT

1200 0

(70.79)

1000 -100

(137.94)

800 (208.40) -200

600 (291.97) -300

(366.02)

400 -400

(445.93)

200 -500

(532.25)

0 -600

1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

FINANCIAL YEAR

PSF deficit shows to be increasing by 2010 deficit will reach a staggering 532.25 KTA with a present rate of domestic production of 608 KTA. PSF demand by the year 2010 is likely to touch 1138 KTA.

6.4 DEMAND AND SUPPLY

Textile spinning mills are the principal consumers of natural and

manmade fibre in India. Consumption of PSF in India has increased with

growth in the textile industry and attendant growth in the industry's

average spinning capacity.

The demand for PSF in the last three years has been increasing at a

compound annual rate of 27 per cent. The main reasons cited for the

growth are as follows:

Shortage of cotton,

Increased export of PC yarn and fabrics,

Easy availability of PSF due to sufficient production and

Competitive prices of PSF.

The prices of input materials for PSF can vary drastically, depending on

the exchange rates of the rupee and the prices of oil __ PTA and MEG are

basic raw materials of the PSF industry and they are both

petrochemical elements. In the current year, the prices of input

materials have risen significantly.

This is coupled with the serious problem of dumping. It is a major

threat as

countries such as Korea and Japan, have been dumping their produce in

the local

market. The local industry suffers, as the dumped produce is cheaper

than the

locally manufactured PSF. To counter this, an anti-dumping resolution

has been

passed.

PSF serves as a substitute for cotton. As a result, the demand for

cotton can be easily replaced by PSF. It is in the interest of the cotton

growers that less and less PSF and more cotton are consumed. At the

same time, the textile sector is in a position to exert immense

pressure on the government, as the textile sector prefers to have PSF

rfibercoEMAND GROWTH DRIVERS

at low prices to manufacture mixed fabrics.

With time, the demand has been saturated with supply. The product

has achieved maturity. Looking at the demand growth for PSF over the

last several years, it can safely be assumed that the demand will

continue to outstrip supply in the future. With the local mills running to

full capacity, imports are used to bridge the demand\ supply gap.

6.5 DEMAND DETERMINANTS

Except for the fibre consumption downstream and the fibres exported and imported demand is going to be affected by a lot of economic ,non economic factors.

Table -39

The economic factors: Condition

Income – Mainly per capita income GDP growth rate >8%

Price of the goods Polyester Price is low

Inflation <8%, after economic reforms

Economic Outlook Very bright-Going to be thesuperpower

The Non –economic Factors:

Population Going to be the most populous country

Properties of the fiber. Excellent

Technological advancement for fiber /textile m manufacturing and Economic scale size is changing-lots ofapplication. research is going on.

Usability of fiber in different human need Apparel>Home>Industrial

Priority of textile spending to other spending People are highly fashion conscious

Climate Tropical

Inter fiber competition Polyester in less costlier than otherfiber

Culture/Fashion Fashion fabric

1. Consumption pattern of people are likely to increase .Per capita

fibre consumption of India at present is around 2.3% which is

likely increase to 3.2% by 2010.

2. Fashion trends are changing which calls in for more polyester

consumption.

3. Industrial applications like geo textiles filtration media,tyre

cord,ropes ,tents and tarpolines.

4. Medical applications- suturing anti microbial,bandages .

5. Filling applications like bedding,pillows quilts etc.

6. Construction reinforcement material.

7. Used extensively in FRPs for defence applications etc.

8. Short -cut fibres have paved their way into the paper making.

Application as fashion fabrics in making carpets, nonwovens,

uphoslery etc

6.5.2 MACRO ECONOMIC FACTORS AFFECTING DEMAND

Indian economy is poised for a very high growth(>8-10%).

In India Textile consumption directly vary with per capita NNP (

Net National Product),in case of China it is half of NNP.

Indian manufacturing is now become globally competitive .

Growing population,by 2050 India will be the most

populouscountry of this planet.

Change in demographic profile.(350 million people of -Productive

age group)-2025 in the peak.

A booming textile sector-domestic market of more than US $25

Billion (Year 2002)-Export market US- ($50Billion by 2010)

Textile outsourcing by developed nation : Now is an emerging

story.

Textile industry has high potential to grow .

The BRIC Report(Brazil,Russia,India,China):Indian-economy in

the year 2030: Third biggest economy after Japan.

6.6 DEMAND PROJECTIONS

Whereas the spun yarn shows a growth of 4%,the filament yarn

shows a

compounded growth rate of 11% .The share of polyester consumption

have

grown from 87% in 1997-98 to 94% in 2002-03 which shows a

compounded

annual growth rate of 7%. In the weaving sector the non cotton and

blended

fabric growth rate is 8% and 1% respectively. This growth rate is a major

driver

for polyester consumption demand. Over the previous decade,

local

demand of yarns has increased on an average annual basis by 4.8% to

about 3 million tonnes in 2003/04. During this period the ratios of the

yarn types have drastically changed and polyester continued its

triumphal procession.

The share of polyester in filament yarns has gone up from 74% to

91% and in non-cotton spun yarn blends from 58% to 74%. The

growing filament demand in India resulted from a shift in consumer

preference towards synthetics particularly in rural areas, the

consumption rose from 49% to 66% over this period. Cotton demand

in the same areas dropped from 51% to 34%. Two of the fastest

growing end-uses for filament in India have been stimulating this

growth.

Firstly, sarees - traditional Indian dress for ladies - before the

widespread of synthetics were made for the high-end of the market

out of silk and for the low-end out of cotton. The introduction of high

taxes on polyester by the Indian government was to protect the own

cotton industry. As a result, polyester became an expensive fiber with

high in demand among rich people only. The growing demand for

polyester sarees substituted more and more silk in the high-end

market. After tax reductions on polyester, a booming demand for

polyester sarees materialized which still had the image of an exclusive

piece of garment but became affordable to a larger share of Indian

ladies.

Secondly, there has been a growing polyester demand for men’s wear

trousers and suitings.Changing purchasing patterns have been

influenced by its wearing comfort, easy care and advantages in price.

Previous year’s polyester output has increased by 7.2% to 22.26

million tonnes. Above average growth has been observed in filament

markets, rising by 7.6% to 12.87 million tonnes. Staple fibers went up by

6.6% to 9.39 million tonnes.

6.7 POLYESTER FILAMENT YARN

Polyester filament yarn is growing @ 6% carg over 97-98 prodn

.Looking at the downstream industries polyester filament yarn

consumption is growing @ 11% and polyester cloth consumption is

increasing @Share of Staple and Filament in India

•In India annual demand for Yarn has increased on an avg 4.8 % to

3.0 million ton.

•During this period the ratios of yarn shifted from cotton to polyester

•The share of polyester in filament has grown from 74% to 91 %

•The share of polyester in non cotton spun blend from 58% to74 %

•Polyester in rural India shifted from 49 % to 66 %

•The main Consumers - Sarees and men’s wear

6.8 DOMESTIC DEMAND OF VARIOUS FIBERS

VSFCONS in KTA -Table40

1990-91 154

1991-92 1631992-93 161

1993-94 1811994-95 1951995-96 207

1996-97 1861997-98 1961998-99 182

1999-2000 2052000-2001 2212001-2002 191

2002-2003 2262003-2004 2392004-2005 2402005-2006 2422006-2007 2422007-2008 2442008-2009 2452009-2010 246

VSFCONS IN KTA VSFCONS in tonnes Linear (VSFCONS in tonnes)

350

300

y = 6.4294x + 146.08 R2 = 0.8843

250

200

150

100

50

0

1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

AFSCONS in KTA Table-41

1990-91 47

1991-92 501992-93 541993-94 721994-95 991995-96 921996-97 1091997-98 1111998-99 105

1999-2000 992000-2001 1042001-2002 1142002-2003 1192003-2004 1292004-2005 1392005-2006 1492006-2007 1612007-2008 1712008-2009 1822009-2010 195

Figs from 2003-4 onwards are projected figures.

ASFCONS in tonnes

Poly. (ASFCONS in tonnes)

200

180

160

140

120

100

80

60

40

20

0

ASFCONS IN KTA

y = 0.0747x2 + 4.8054x + 51.068

R2 = 0.9156

YEAR

17661992-93

COTTON CONS in K tones table-42

1990-91

1991-92COTTON CONSUMPTION in tonnes

4500 Poly. (COTTON CONSUMPTION in 1993-94tonnes)

1994-954000 1995-96

1996-973500

1822

COTTON CONSUMPTION IN KTA

1895205120652295 y = 2.6694x2 + 49.702x + 1807.2

R2 = 0.94132566

3000

2500

2000

1500

1000

500

0

1997-98 27191998-99 2485

1999-2000 26522000-2001 27212001-2002 27012002-2003 26522003-2004 27542004-2005 29682005-2006 31792006-2007 34522007-2008 36272008-2009 38082009-2010 3995

COTTON yarn prodn in Mn kg Table-43

YEAR

1990-91 1510

1991-92 14501992-93 1523

COTTON yarn prodn in Mn kg COTTON YARN PRODN IN KTAPoly. (COTTON yarn prodn in Mn kg) 1993-94 1622

4000 1994-95 15861995-96 1894

3500 1996-971997-98

21482213

y = 3.0132x2 + 32.645x + 1480.3R2 = 0.938

3000 1998-99 20221999-2000 2204

2500 2000-20012001-2002

2267 2212

2000 2002-2003 21772003-2004 2254

1500 2004-20052005-2006

2446 2631

1000 2006-2007 28742007-2008 3015

500 2008-2009

2009-20103157

3300 0

1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

COTTON yarn prodn BLENDED yarn NONCOTTON yarnin Mn kg prodn in Mn kg prodn in Mn kg

1990-91 1510 210 104

1991-92 1450 237 1181992-93 1523 253 119

1993-94 1622 311 134

1994-95 1586 351 1531995-96 1894 395 196

1996-97 2148 484 162

1997-98 2213 583 1771998-99 2022 595 191

1999-2000 2204 621 221

2000-2001 2267 646 2472001-2002 2212 609 280

2002-2003 2177 585 319

2003-2004 2254 665 3812004-2005 2446 750 377

2005-2006 2631 840 371

2006-2007 2874 953 357

2007-2008 3015 1049 351

2008-2009 3157 1153 342

2009-2010 3300 1268 329

Table -41

BLENDED yarn prodn in Mn kg

Poly. (BLENDED yarn prodn in Mn kg)

1200

1000

800

600

400

200

01990-1991-1992-1993-1994-1995-

91 92 93 94 95 96

BLENDED YARN PRODN IN KTA

y = 0.3277x2 + 33.131x + 189.83

R2 = 0.9392

1996-1997-1998-1999-2000-2001-2002-2003-2004-2005-2006-2007-2008-2009-97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

NONCOTTON yarn prodn in Mn kg PRODUCTION OF NON COTTON YARN IN KTAPoly. (NONCOTTON yarn prodn in Mn kg)

700

600

y = 1.2643x2 - 2.4853x + 121.64 R2 = 0.9868

500

400

300

200

100

0

1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

CLOTH AVAILIBILITY SQCM

Linear (CLOTH AVAILIBILITY SQCM)

380000

360000

340000

320000

300000

280000

260000

240000

220000

2000001990-1991-1992-1993-1994-

91 92 93 94 95

CLOTH AVAILIBILITY PER CAP SQCM

1995-1996-1997-1998-1999-2000-2001-2002-96 97 98 99 2000 2001 2002 2003

YEAR

y = 6420x + 233904

R2 = 0.9415

2003-2004-2005-2006-2007-2008-2009-2004 2005 2006 2007 2008 2009 2010

Cloth Availibility in sqcm Table-42

1990-91 241400

1991-92 2287001992-93 2450001993-94 262200

1994-95 2598001995-96 2799001996-97 293000

1997-98 3092001998-99 281900

1999-2000 305500

2000-2001 3068002001-2002 3197002002-2003 3137002003-2004 3124002004-2005 3233672005-2006 3336992006-2007 3484722007-2008 3552062008-2009 361941

2009-2010 368676

DOMESTIC DEMAND FOR COTTON/BLENDED/NONCOTTON YARNS AND DEMAND FOR COTTON/VISCOSE/AFS -Table-43

TOTAL

COTTON COTTON BLENDED yarnVSFCONS

1990- 91

1991- 92

1992- 93

1993- 94

1994- 95

1995- 96

1996- 97

1997- 98

1998- 99

1999- 2000

2000- 2001

2001- 2002

2002- 2003

2003- 2004

2004- 2005

2005- 2006

2006- 2007

2007- 2008

2008- 2009

2009- 2010

CONSUMPTIONin KTA

in KTA

1822 154

1766 163

1895 161

2051 181

2065 195

2295 207

2566 186

2719 196

2485 182

2652 205

2721 221

2701 191

2652 226

2754 239

2968 240

3179 242

3452 242

3627 244

3808 245

3995 246

yarn yarn

ASFCONS prodn in prodn in

in KTA Mn kg Mn kg

47 1510 210

50 1450 237

54 1523 253

72 1622 311

99 1586 351

92 1894 395

109 2148 484

111 2213 583

105 2022 595

99 2204 621

104 2267 646

114 2212 609

119 2177 585

129 2254 665

2446139 750

2631149 840

2874161 953

171 3015 1049

3157182 1153

3300195 1268

NONCOTTON prodn

yarn prodn in Mn

in Mn kg kg

104 1824

118 1805

119 1895

134 2067

153 2090

196 2485

162 2794

177 2973

191 2808

221 3046

247 3160

280 3101

319 3081

381 3300

3573377

3843371

4184357

351 4415

4652342

4898329

CLOTH

AVAILIBILITY

SQCM

241400

228700

245000

262200

259800

279900

293000

309200

281900

305500

306800

319700

313700

312400

323367

333699

348472

355206

361941

368676

7.2 SWOT ANALYSIS - RIL PSF BUSSINESS

STRENGTHS

• An affordable substitute for Cotton

- Already 60 mills in South has been converted

from cotton to polyester

• Production cost - reducing

- Core competency because of strong

backward integration

• Versatile - In product mix

- Because of number of separate establishment

with strong versatile technology

• Customized ability for Niche applications

- As having different capacities of production

line, special requirement of customer fulfilled

•Capacity expansion

- Latest capacity expansion by 20% in Hazira

only by the end of 2002.

- Acquisition/take over of other plants at

different locations across the country to cater

customers need accordingly, which helps also

to reduce the freight cost• Strong information networking -

All the modules of SAP R/3 installed for

executing all operations of RIL group

- Communication network through Lotus Notes

• Expansion with latest tech. & machinery

- New expansion with technology and

machinery from Zimmer-AG

Having taken over Trivera Ril enters the world with the 150000

TPA capacity of speciality fibre making & will get an competitive

edge in the ofter WTO world scenario.

WEAKNESSES

Cotton cloning still far away

- Though micro denier polyester for better feel

already introduced in the market, still market for

good quality cotton is existing for the

segments of higher-middle class and upper

class people

• Costlier polyester input in textile chain

-

• Cumbersome downstream requirement

- Downstream process for polyester required

huge investment and manpower with technical

skills and expertise

• Existing huge capacity old machinery's

- Though revamping process going on, still

some inherent constraints exist in old m/c’s

OPPORTUNITIES

• Strong linkage with textile growth

- Polyester fibre is one of the main raw material

for textile industries and high growth in textile

industries is expected as the regulations of

WTO will come in effect from 2004

• High growth in Polyester

- For coming 10 years growth projection:

World = 6.0% (CARG)India = 9.3% (CARG)

• Non apparel growth potential

- Huge potential of growth in this segment

• Technological innovation - Quality and Cost.

• Cotton substitution

- With introduction of micro denier in product

line, it enhances the possibilities

• Business going to be more open globally

- By the year of 2004, export market for polyester

will be more open, specially for USA-market

THREATS

• Cheaper textile input - Filament

- Increase of use of filament in textile industries,

specially for sharies, etc.

• Per capita textile spending

- It is in decreasing trend

• Biotech innovation in Cotton

- It facilitates to impart more desirable quality in

cotton

• Expansion of production capacity by competitor

- M/S Indorama going to expand their capacity by

another 1.5 Lac TPA

• Expansion of business by China globally in Polyester

- After entry of China in global level it becomes a

threat for each country, because of their cost

leadership

7.3 PRODUCT

PRODUCT Table45

With a majority share in

the Indian market,

Reliance today offer a

Type

Apparel

ProductDetails

Trilobal (TBL)

Cut

LengthDenier

(mm)1.5, 2.0,

40, 44, 542.5

Lustre

Bright

wide range of RecronTM

Staple Fibre. It has

developed a product

Superblack

Optical White (OW)

1.2,

1.5,2.0

1.2, 1.4

32, 38, 44, 51

40, 44

Bright,Black Semi dull

portfolio keeping in mind

different requirements of

its customers.

Micro

Differentiated

0.8 40, 44, 51

1.2,1.0

32,38,40,44,51

Semidull

Semi dull,Bright

Semi Commodity 1.4,2.0,3.0

32,38,40,44,51 dull,Bright

Non -woven

Trilobal (TBL)

1.5, 2.0,40, 44, 54

2.5Bright

Superblack 1.2,

1.5,2.0

32, 38, 44, 51

Bright, Black

Semi Differentiated 1.2,1.0

32,38,40,44,51 dull,Bright

Semi Commodity 1.4,2.0,3.0

32,38,40,44,51 dull,Bright

Super High Thread Tenacity 1.2 40, 44 Bright

(SHT)

Dope Dyed(DD) Black SHT

1.2 40, 44Bright. Black

Based on the process undertaken product types:

Semi-dull

Bright

Optically white

The offer basket of products comprising a mix of speciality and regular

commodity products. Branded Products

RecronTM Dyefast

RecronTM Superblack

RecronTM Superdye

COMMODITY PRODUCTS

Commodity products can be used by spinning/composite mills having

cotton/modified cotton spinning systems (ring, open end and air jet). The table below

shows the product range of commodity products.

Table -46

Denier Blend Count Range End Use (Fibre/Yarn/Piece dyed)

3.0 100% P/C 12s, 15s, 20/2, Suiting, Dress materials,

or P/V 30/2 Upholstery

2.0 100% P/C 15s, 18/2, Suiting, Dress materials,

or P/V 24/2, 30/2, Sheeting

40/2

1.4 100% P/C 20s, 30s, 30/2, Suiting, Dress materials,

or P/V 40/2, 45s Hosiery, Shirting, Sheeting

Denier - 1.4, 2.0 and 3.0

Cut length - 32, 38/40, 44 and 51 mm

Lustre - Semi dull or Bright

Tenacity - High

Product Advantages

Consistent Quality: Dedicated lines denier wise, with in-house

raw material feed, resulting in high level of process/quality

consistency.

Consistent merge nos. permitting long runs at customer end,

with no hassles in colour matching, while doing stock, yarn or

fabric dyeing.

Consistent performance: Finishes application controlled within

narrow tolerances, ensuring top quality performance, product

quality and productivity.

DIFFERENTIATED PRODUCTS

Differentiated products can be used by spinning/composite mills

having cotton/modified cotton spinning systems (ring, open end and air

jet) with high emphasis on quality/productivity, catering to top end of

domestic/export market.

Product Range

Special features

Benefits

Applications

Advantages

Product Range

Denier - 1.0, 1.2

Cut length - 32, 38/40, 44 and 51 mm

Lustre - Semi dull or Bright

Tenacity - High

1.0 Denier RecronTM is a superior Polyester Staple Fibre that meets the

following requirements of the weaver:

It is a stronger, more even and a much cleaner yarn with lower

hairiness to withstand high stress and strain in high speed

weaving.

It enables delivery of longer lengths of defect free fabrics, for

exports.

Can be spun at high productivity thereby reducing costs.

Special Features

The fibre is finer by 15 to 20% compared to 1.2 Denier.

Its tenacity is higher by 5%.

It is dressed with a special finish to facilitate good performance

on high production cards with minimum cylinder loading and

minimum fly liberation/lapping on draw frames, speed frames

and ring frames at high speeds.

Benefits

Good substitute for costly cotton in fine and superfine count

spinning.

Imparts higher CSP, lower u% and imperfections to blended

yarn.

Lower yarn hairiness (by 20% to 50%) as compared to 1.2

Denier, at the same spindle speed.

Higher ring frame productivity by 5 to 10%.

Improved weaving efficiency by 6% in high-speed air jet looms

and 2% in ordinary looms.

Better fabric quality and first grade realization.

Suggested End Uses Table-47

Denier Blend Count Range End Use (Fibre/Yarn/Piece

dyed)

1.2 100% P/C 30s, 40s, 45s, 50s, Sarees, Dhotis, Hosiery

or P/V 60s, 2/60s

1.0 100% P/C 30s, 45s, 50s, 60s, Sarees, Dhotis, Hosiery,

or P/V 2/60s, 2/76s, 2/90s, Dress materials.

2/100s

Denier - 1.0, 1.2

Cut length - 32, 38/40, 44 and 51 mm

Lustre - Semi dull or Bright

Tenacity - High

Advantages

Consistent Quality: Dedicated lines denier wise, with in-house

raw material feed, resulting in high level of process/quality

consistency.

Consistent merge nos. resulting in cost savings to customers on

account of uninterrupted long runs with no hassles in colour

matching.

Consistent performance: Finish application controlled within

narrow tolerances, ensuring top quality performance, product

quality and productivity.

Value for money: Incremental realization and productivity

particularly with 1.0 D, resulting in higher margins to spinners

with better market preference from their customers due to

better downstream productivity/quality of end product.

SPECIALITY PRODUCTS

Micro Fibre

RecronTM Super black fibre

RecronTM Staple Fibre for Sewing Thread (SHT Fibre)

Optical White (OW) PSF

RecronTM Triloble (TBL) PSF

Product Range

Advantages

MICRO FIBRE

RecronTM Micro Fibre is an economic substitute for expensive long

staple fine cotton used as raw material to make premium Men's and

Ladies' wear.

Special Features

Extremely fine fibre of 0.8 denier, for imparting softer feel to

fabrics.

Can be used for producing superior fabrics in all weight

categories, with all the advantages of PSF along with soft, silky

touch.

Fabrics produced out of RecronTM 'Micro' have exceptional drape

and comfort properties.

Advantages

Produces yarns of superior quality in terms of yarn, CSP, uster

u% and imperfections compared to 1.0 to 1.2 denier.

Capable of spinning finer counts up to 2/100s or 2/120s in 100%

or in blend with better quality combed cotton.

Ideally suited to make high quality branded shirting and dress

material.

Offers higher productivity at spinning, high speed weaving and

knitting.

RECRONTM SUPER BLACK FIBRE

RIL is the largest producer of black fibre in the world with a share of

20% of the capacity. RecronTM Super black fibre is a superior raw

material for producing high quality black yarns and fabrics.

Special Features

Consistent depth of shade with good tensile properties.

Optimum finish level to give consistent performance and quality.

Advantages

Superior spinning performance, productivity and quality

compared to fibre dyed spinning.

Processing cost of fabrics made out of RecronTM Super black is

cheaper than fibre, yarn or piece dyed fabrics in terms of:

o lower production costs due to better performance

o higher consistency of shade and better depth

o higher all round fastness

o eco-friendly

o releases dyeing capacity for other shades/products

RECRONTM STAPLE FIBRE FOR SEWING THREAD (SHT FIBRE)

SHT Fibre is the ideal choice to make high quality sewing thread

needed by high quality garment manufacturers.

Special Features

Ideal and economical raw material compared to cotton.

Optimised tenacity, elongation and shrinkage values to give top

quality threads.

Fibre finish optimised to give good spinning performance and

thread quality.

Advantages

Threads manufactured out of SHT fibre offer trouble free

performance on high speed stitching machines.

RecronTM OW PSF offers an economical route to manufacture

white (bright) sewing threads of better quality.

RecronTM 1.2 SHT DD black offers the advantages of higher

depth of shade, better fastness properties and quality.

RecronTM Optical White (OW) PSF

RecronTM Optical White is used in fabrics like dhotis, sarees, dress

materials, hosiery and sheeting. Where light, pastel shades or prints

can have better aesthetics with a white background.

Product Range

1.2 Denier in 32, 38, 40, 44, 51 mm cut lengths.

Special Features

OW addition is consistent and gives natural white shade with

good fastness properties.

Fibre is finished optimally to give good performance and quality.

Advantages

Cost effective way for producing better quality dhotis, sarees,

sheeting, hosiery and dress materials.

Customer benefits in terms of better price for the end product

compared to conventional manufacturing of similar products.

RECRONTM TRILOBLE (TBL) PSF

Targeted to manufacture high quality, meduim priced suitings, dress

materials and furnishing fabrics through the stock dyed route in 100%

P or P/V blends in a wide range of colours. These fabrics have superior

luster and feel similar to higher priced worsted suitings and dress

materials.

Product Range Table-48

Sr. Product Details Denier Cut Length Lustre

No. (mm)

1 Trilobal (TBL) 1.5, 2.0, 40, 44, 54 Bright

2.5

2 Super High Tenacity 1.2 40, 44 Bright

(SHT)

3 RecronTM Super Black 1.2, 1.5, 32, 38, 44, 51 Bright,

2.0 Black

4 RecronTM Super Black 1.2 40, 44 Bright.

SHT Black

5 Optical White (OW) 1.2, 1.4 40, 44 Semi dull

6 Micro 0.8 40, 44, 51 Semi dull

Advantages

Consistent Quality: Dedicated lines denier wise, with in-house

raw material feed, resulting in high level of process/quality

consistency.

Consistent merge nos. resulting in cost savings to customers on

account of uninterrupted long runs.

Superior performance: Finishes application controlled within

narrow tolerances, ensuring top quality performance, product

quality and productivity.

Value for money: All these products go for value added end

products, translating to higher net realisation/margins to our

customers.

TOW PRODUCT RANGE

Polyester Tow

Polyester tow can be broadly defined as a bundle of filaments, that

are continuous in length. These filaments are essentially non-

annealed.

The worsted mills process the polyester tow on a machine called 'Tow to

Top Converter'. This cuts the tow into variable cut length fibres in the

form of sliver. Followed by a gilling process that yields a more uniform

sliver which is then packaged in the form of a ball called Polyester

Tops.

These polyester tops are then blended with wool tops and spun to

produce polyester woollen blended yarn, which are subsequently

woven into polywool-blended fabrics. The approx. characteristics of

100% polyester tops are as follows.

Table -49

Denier 2.5D or 3D

Average Length 78mm

C.V.% of Fibre Length 32%

Wool Tops

Mills in India normally import raw wool. The 'woolWool 22.5Micron

Average 72mmLength

C.V.% 40%

grease' is then removed by scouring. This clean wool

is then processed through carding, gilling, combing

machines and converted into wool tops.

The characteristics ofof fibrelength wool are determined

Table-50 by its micron value.

Wool tops with finer microns of 17 to 19 are

used to make expensive lightweight suits.

Wool tops having 22.5 micron value is by and

large the standard input for the worsted

mills. Its properties are as follows.

Listed in the table below, are the TOW

products made by Reliance Industries Limited

for the worsted industry.

semi-dull

In semi-dull , the TiO2 content is 0.2 % to

0.3 %and the fibre cross-section is round.

This type of fibre is generally used for

apparels, industrial yarns and fabrics.

Product

2.5DNormal Tow

2.5DTrilobal Tow

3.0DTrilobal Tow

2.0DRecronT

M SuperBlackTow

3.0DRecronT

M SuperBlackTow

3D Dope dyedTrilobal BlackTow

2.4dtex

LowpillTow

Lustre Cross-section

Normal Circular

Bright Trilobal

Bright Trilobal

Black Circular

Black Circular

Black Trilobal

Semidull Circular

Table-51

Bright

Here, the TiO2 content is less than 0.05 percent. Lower amount of

TiO2 gives brightness to the . With this fibre, both triangular

crosssection and round cross-section are made. Plus, Trilobal fibre gives a

shine to both the fibre and the fabric made out of it.

Optically white

In optically whitened , a whitening agent, stable at high temperatures

of 30000C is added to the . The fibre made out of this is extremely

white. It exhibits fluorescence under Ultra Violet light. And saves

bleaching operation during chemical processing. Furthermore, this

fibre is increasingly being used for optically whitened sewing thread

yarn.

A major strength for Reliance's PSF business has been the strong

bonding with the customers, which has ensured that over 75%

of the customers have remained with it for more than 3 years.

RIL’s market share in domestic market is 54% while the market

share of the nearest competitor is 20%.

Reliance meets 70% of the top 100 customer's requirement. Of

the top 100 customers 95% are RIL's client.

Orders processed from customers are delivered within 24 hours, which

leads to on time delivery to the customer reducing their working

capital requirement.

7.4 KEY MILESTONES

Largest producer of black fibre in the world.

Largest producer of trilobal fibre in the world.

Recently introduced short cut polyester staple fibre heralding a

new breakthrough in polyester application. This fibre finds

application in the hitherto unexplored segment of the paper

industry.

Introduced micro fibres for fine count spinning.

7.5 VALUE-ADDED SERVICES

Uninterrupted supply

Widest Range

Marketing and Technical Assistance

Market Intelligence

Distribution and Transportation

Market Intelligence - Down Stream Industry

Uninterrupted Supply

Vertical Integration system ensures that manufacturing units get

constant and unlimited supply of raw material. Which in turn makes

sure customer get uninterrupted supply of RECRON STAPLE FIBRE.

Thereby aiding customer to plan inventory, hassle-free.

Widest Range

With 5 manufacturing locations and 13 manufacturing lines, it has a

unique capability to produce different products of PSF simultaneously

and offer the widest product range off-the -shelf. Customers can have

uninterrupted supplies of all its products maintaining zero inventory at

their end, resulting in significant savings in their working capital.

Marketing and Technical Support

The strategically designed marketing network (4 regional offices and

Head office) ensures prompt and value added service to customer.

Customer can also make avail of technical assistance from this

network.

Market Intelligence

Head Office at Mumbai keeps track of the growth and status of the

down stream industry. Customers get regular feed back on various

opportunities available in the market. Plus, help customer in

identifying markets, both domestic and International. Technical

Services Team provide customer with valuable tips on polyester

spinning.

Distribution and Transportation

RIL’s wide network covers even the remotest Customer. The wide

distribution and transportation network enables servicing of part loads

also. This ensures just in time supplies for the customer thereby

reducing the average inventory from about 15 days to 7 days and the

inventory carrying costs.

Market Intelligence - Down Stream Industry

The Head Office at Mumbai keeps track of the margins of the down

stream industry. We also give regular feedback to the customer

regarding the yarn margins on various polyester blended yarns so that

the profitability of the customer improves. RIL also help the customers in

identifying markets both domestic as well as exports. Our Technical

Services Team also provides valuable tips to the customers on

polyester spinning.

7.7 MARKETING

Reliance polyester staple fibre market is devided into 4 zones.

North zone - Zonal office at ‘Ludhiana’

South zone - Zonal office at ‘ Coimbatore’

Eastern Zone - Zonal office at ‘ Calcutta’

Western zone - Zonal office at ‘ Mumbai’

Fibre marketing office at Mumbai, co-ordinates the activities of all

regional sites.

In the similar way customers are also classified region wise.

The marketing arm of PSF Business is referred to as Fiber Marketing

Division (FMD).The Fiber Marketing Division at HO consisting of

marketing and technical service functions is assisted by regional offices

situated at the following placees.

Marketing and Technical service for tow products are handled by PSF.

1. North ( Dlhi / Ludhiana / Bhilara )

2. Calcutta ( Hyderabad )

3. Ahmedabad

4. South ( Coimbatore /Madurai /Bangalore /Erode /Dindigul

/Udumalpet

5. Rajapalayam / Salem )

6. Bombay

7. Bombay-North

The Regional and Area Offices cater to the requirements of customours in

the respective areas and the HO coordinates the activities of the

regional offices.

The Computer Systems in operation with PSF Marketing ( HO ) are

developed and maintained by MIS ( HO ) .

In case of failure of computer systems / electronic media,or any other

mode of communication can be used for transfer of information as

authorized by HOD.

7.8 LOGISTICS

Reliance brings customer e-enabled, end-to-end logistics solutions to

redefine India. Today customer will get the best in technology and

practices, better service, greater asset utilisation and value to all.

The Logistics (P) Ltd offers complete multiple freight options, including

full truck loads for long and short haul transportation and optimodal

distribution systems. What's more! The logistics would be flexible in

finding the best mode and service for our customers, at competitive

rates.

Services

Technology initiatives

Risk coverage

Transportation/Deliverables

Services

The unique service features include:

Customisation of transportation solutions

Dedicated customer solutions team

Solutions design to address

Compatible vehicle selection

Mode of transport

Routing

Adapting our processes and capabilities to suit customerr needs

Performance measures ( KPI) identified and documented

Cost optimisation

Use of multiple axle vehicles

High capacity utilisation

Lowest cost per ton km

Multi purpose vehicles

Compatibility to cargo profile

Optimum vehicle utilisation

Captive fleet of vehicles

Control on market fluctuations

High deployment efficiency eliminating opportunity costs

Advanced technology to optimise cost & service efficiency

Cargo safety through technology

Technology Initiatives

Pioneering technology initiatives include:

VTS (Vehicle Tracking Systems)

Real time tracking of freight movements and accurate

forecasting of vehicle arrivals

GPS + GSM technology would capture & send location data of

the vehicles

GIS data location of the vehicles are superimposed on standard

maps and routes across the nation, to enable tracking of

consignments

Round the clock vehicle position status from the time of loading

until unloading

Real time control over shipment delivery cycle times

TMS (Transport Management software) Optimisation tools &

decision support software system

Integration of VTS with TMS providing seamless information

flows

Total software solution for the entire gamut of transport

functions from receipt of order till submission of bills and freight

realisation

An Optimisation tool and decision support system with focus on

load planning, route optimisation and capacity / space utilisation

Controlled logistics and Distribution management resulting in

better services

Better placement efficiencies and order fulfillment

Service level improvement through planning & monitoring

Overall cost effectiveness

Lotus notes connectivity across all operating arms of Reliance

Logistics (P) Ltd.

Full Risk Coverage

Special Contingency policy with New India Assurance Co for:

Natural calamities viz storm, cyclone, flood, rainwater etc

Other hazards viz fire, riots, strike, terrorism and criminal act

Theft

Burglary

Pilferage

Contamination

Transportation Deliverables

Dedicated logistics team

Improvement in the following key KPI's

o Vehicle placement lead time

o Delivery cycle time

o Customer complaints & claims o

Cost reduction

o Better capacity utilisation

o Use of multi axle vehicles

7.9 PRICING

Demand and supply forces in the market determines the price of the

product in the market. The psf market is a defined market and the

demand for the fibre is generally affected by the following factors.

Seasonal factors: Consumption increases during the festive seasion

hence call for a high demand.

Dumping : Countries like Tiwan where won is depreciating offers fibres at

much cheaper rate which affect the price of the local markets. Hence

the anti-dumping measures taken by the government are

accountable.

Cotton price: Cotton is a monsson driven product and is a substitute of

polyester. Hence a good/bad monsoon affects the price of cotton in the

local market which inturn changes the down stream industries to swith

over to substitutes like polyester and viscose, so demand increases

and hence price.

Viscose price: Viscose too is a close substitute of both polyester and

cotton.Hence its price also affects the price of polyester.

Fashion trends: Fashion trends inculate fashion habits in people.

Fashion apparel are more made from polyester than any other fibre for its

variety of availability.Hence fashion affects price.

Monsoon: Monsson affects cotton corp hence demand of substitute

cotton.

PSF

ASFPRICE PSF,VSF &ASF

VSF

110

100

90

80

70

60

50

40

98-99 99-00 00-01 01-02 02-03

FY

Competitors pricing

Customisesd product: Mills producing variety or speciality products

often vye for customized products.Customized products always come

with a premium.

Speciality product: Special products like micro denier are in high

demand because of their flexibility and properties and feel they impart.

They are sold at a premium.

Trade Discounts.

Trade discounts are given for Quantity and Payment.

7.10 RELIANCE CAPACITY

Reliance sitewise production capacity 2004-05 (KTA) Site HZ (Hazira) PG (Patalganga) IPL (Barabanki) OPL (Dhenkanal) RSL (Allahabad) CIPL (Mouda) AFL (Hoshiarpur) SIL (Silvassa) Total

PSF 196 107 38 31 - - 81 - 453

PFF 29 - - - - - 10 - 38

POY 183 131 - 59 47 14 - 435

FDY 13 9 2 24

Subtotal 408 250 38 31 68 49 105 950

Chips 41 14 2 - 57

PET 269 269

Total 677 250 38 31 109 63 107 - 1277

1085.1

PTY - - - - 5 97 102

Table-54

Latest take over of Trivera adds up 160000 TPA capacity

Trevira has a capacity of 130,000 tonnes per annum of polyester fibre

and yarn, spread over four locations in Europe namely Bobingen and

Guben (Germany), Silkeborg (Denmark) and Quevaucamps (Belgium).

In addition, it has a state-of-the-art research and development (R&D)

facility at Bobingen. With the acquisition of Trevira and its expansions

underway in India, the combined total polyester fibre and filament

yarn capacity of Reliance will exceed 1.8 million tonnes, making

Reliance, the largest polyester fibre and yarns producer in the world.

Commenting on the acquisition, PCI, leading UK based polyester

consultant says, ‘the market was surprised that Reliance suddenly

snapped up the Trevira polyester fibres operation in Germany. They

achieved this ahead of two other candidates from within Greater

Europe who had possibly expected to acquire the business for a

minimal financial outlay.’ It applauds that the acquisition provides

Reliance, the use of a proven successful development facility

supporting a differentiated product portfolio (including the Trevira CS

development for flame-retardant end uses).

The Trevira brand and products will now have access through the

established Reliance sales network to India, one of the fastest growing

textiles markets in the world. Trevira will provide Reliance a strong

foothold in Europe and place it in a position to cater to all market

segments of polyester fibres and filament yarns worldwide. Trevira’s

knowledge base developed over a period of time will be

complementary to Reliance's existing R&D facility, the Reliance

Technology Centre in India. The synergy will provide comprehensive and

innovative solutions for apparel and industrial applications of

polyester to customers worldwide.

Trevira is a highly specialized manufacturer of polyester products. The

company has several valuable patents and technologies together with a

strong R&D setup with substantial accumulated research knowledge.

Trevira is the market leader in Europe in high value applications of

polyester, especially in automotive and home textiles. Trevira is a

widely known and well-recognized brand both amongst customers and

producers of synthetic fabrics.

7.11 STRONG GROWTH DRIVERS FOR POLYESTER IN INDIA

• Quota removal by developed quantries (18% of the world current

production will be either from India or China)

• Big Boom in textil export. Textile Exports to increase from

current $13bn to $50bn by 2010. Polyester based textile growth

• Increase in population and change in demographic pattern with

increase in the % of consumer class

• GDP growth rate more than 8 %

• Low per capita consumption .India - 1.4 kg; Pakistan - 3 kg;

China - 4 kg; Indonesia - 5 kg

• Growing non apparel applications .23% of global demand, but

negligible in India

• Cotton Viscose, Acrylic replacement.

Export of manmade textile grew by 16% to Rs.4560 crore in the

April-October 2003 compared to Rs.3921 Crores export in the

year ago period.

7.12 PSF SUPPLY/DEMAND

Table-55

PSF PSF PSF PSF PSFFYEAR consumptionconsumption Imports in Exports in PRODN IN DEFICIT

in tonnes in KTA KTA KTA KTA

1990-91 120812 121 10.5 23.9 134

1991-92 131342 131 8.4 13.2 136

1992-93 153316 153 9.1 17.3 162

1993-94 212094 212 19.1 7.1 200

1994-95 254378 254 44.3 11.0 221

1995-96 258978 259 40.4 8.9 227

1996-97 326033 326 38.6 8.2 296

1997-98 457203 457 29.8 8.0 439

1998-99 523527 524 17.4 16.6 523

1999-00 514250 514 13.8 51.1 551

2000-01 558491 558 21.3 29.2 566

2001-02 560465 560 26.9 17.9 551

2002-03 578622 579 25.8 29.3 5822003-04 671421 671 20.7 28.1 608 (70.8)

2004-05 739441 739 22.4 28.9 608 (137.9)2005-06 810785 811 24.1 29.7 608 (208.4)2006-07 895231 895 25.7 30.5 608 (292.0)

2007-08 970159 970 27.4 31.3 608 (366.0)2008-09 1050939 1051 29.1 32.1 608 (445.9)

2009-10 1138137 1138 30.8 32.9 608 (532.3)

7.13 DEMAND/SUPPLY OF PSF AND RIL MARKET SHARE

SUPPLY/DEMAND-PSF(KTA)

1400

1200

1000

800

600

400

200

0

-200

PSF consumption in KTA

PSF PRODN IN KTADEFICITPoly. (PSF consumption in KTA)

y = 1.1154x2 + 28.998x + 81.744

R 2 = 0.9859

(70.8)(137.9)

(208.4)

-400

-600

-800

YEAR

(292.0)(366.0)

(445.9)(532.3)

PSF DEMAND SUPPLY AND RIL MARKET SHARE Table-56

PSFFYEAR consumption in

tonnes

PSF PSFconsumption in Imports in

KTA KTA

PSF PSFExports in PRODN IN DEFICIT

KTA KTA

RILPRODN

RILMARKET SHARE

1990-91 120812 121 10.5 23.9 134 65 54%

1991-92 131342 131 8.4 13.2 136 65 49%

1992-93 153316 153 9.1 17.3 162 65 42%

1993-94 212094 212 19.1 7.1 200 65 31%

1994-95 254378 254 44.3 11.0 221 65 25%

1995-96 258978 259 40.4 8.9 227 94 36%

1996-97 326033 326 38.6 8.2 296 277 85%

1997-98 457203 457 29.8 8.0 439 277 61%

1998-99 523527 524 17.4 16.6 523 277 53%

1999-00 514250 514 13.8 51.1 551 312 61%

2000-01 558491 558 21.3 29.2 566 341 61%

2001-02 560465 560 26.9 17.9 551 399 71%

2002-03 578622 579 25.8 29.3 582 429 74%

2003-04 671421 671 20.7 28.1 608 (70.8) 453 67%

2004-05 739441 739 22.4 28.9 608 (137.9) 453 61%2005-06 810785 811 24.1 29.7 608 (208.4) 453 56%

2006-07 895231 895 25.7 30.5 608 (292.0) 453 51%

2007-08 970159 970 27.4 31.3 608 (366.0) 453 47%2008-09 1050939 1051 29.1 32.1 608 (445.9) 453 43%

2009-10 1138137 1138 30.8 32.9 608 (532.3) 453 40%Fig from 2003-04 onwards are estimated figures.

DEMAND/SUPPLY OF PSF AND RIL MARKET SHARE

PSF DEMAND/SUPPLY & RIL SHARE

1200

85%

1000 74 %71%

800 61% 61% 61%

54% 53%49%

600

PSF consumption in KTAPSF PRODN IN KTARIL MARKET SHARERIL PRODN

90 %

80 %

70 %67%

61% 60 %

56%

51 % 50 %47%

42% 43%40%40 %

36%

400 31% 30 %25%

20 %

200

10 %

0 0%

YEAR

RIL market share is going to decrease to 40% with present capacity by

2010.

7.14 IMMINENT THREAT TO OF RIL PSF BUSINESS

Imminent threat to of RIL PSF business

Home grown Indorma is doubling capacity by2005.Going for 800 TPD

CP.World biggest PSF producer Kosa has took over Dupont Polyester

Business(Koch Industries-Earlier INVISTA-$6.3 Billion textile company

of Dupont.).Sanfangxiang is coming up with 1200TPD PSF Project in

China .Total PSF capacity :1600 TPD.-World largest in single

location.Zimmer,Dupont are implementing some of the mega PSF/PFY

projects-800 TPD/CP.Petrochemical cycle has just started.Delaying of

mega project may take away our market leadership.The growing

domestic demand and the growth of china in the asean region is one of

the major concern.

7.15 THE NEED FOR PSF EXPANSION…..

Per capita polyester consumption is lowest in the world 1.25 kg, -

World average 6kg./Per capita China 4.0 kg/CapitaFiber used for

apparel purpose is very high.(93%),but this is changing very fast. SC-

PSF ,Fiber fill, Non woven etc. Present textile export is about US$12.54

Billion .McKinsey- projection , after phasing out of textile quota in

2005 - Export will rise to US$50 Billion by 2010. The new textile

policy has rationalized the disparity between organized sector and

disorganized sectors.25,000 Crore Textile Technology up gradation

fund (TUF)is providing a synergestic Pull effect wich will increase

demand for manmade fibres.Market share of RIL psf business is

dropping from 71% to 54% by the next year in the domestic market

only. Exports are likely to increase after the quota free regim. So to

hold on to the market the Indian companies should go on for market

expansion.

8.0 ANALYSIS AND INTERPRETATION 8.1 INTRODUCTION This chapter deals with the analysis used for various projections in this

project.

8.2 DEMAND FORECASTING

Business is full of uncertainties, and so is the consumer’s

behaviour. Some data is available about the consumption pattern of

the established product, but forecasting demand of a new product is

really a difficult task. Buyers’ tastes and preferences may change over

time, new products may enter market, new technology may develop,

and so on. Under dynamic conditions, it is difficult to forecast demand

correctly.

A forecast is a prediction or estimation of a future situation,

under given constraints. Over the years, different techniques of

demand forecasting have been developed to make it more logical and

accurate.

8.2.1 PURPOSE OF DEMAND FORECASTINGTime-lag is involved in the production of commodities and their

consumption. Similarly, time-lag is also involved in taking a decision

by a firm to produce a commodity and its actual production. The

purpose of demand forecasting differs according to the type of

forecasting, i.e. (a) short -term forecasting, and (b) long-term

forecasting.

(a) Purpose of Short -term Forecasting. It is difficult to define

short run for a firm because its duration may differ according to the

nature of the commodity. For a highly sophisticated automatic plant 3

months’ time may be considered as short run, while for another plant,

the duration may extend to 6 months or one year. Time-duration may

be set for demand forecasting depending upon how frequent the

fluctuations in demand are. Short -term forecasting can be undertaken by

a firm for the following purposes :

(i) Appropriate scheduling of production to avoid problems of

over-production and under-production.

(ii) Proper management of inventories, i.e., purchasing raw

materials at appropriate time when their prices are low, and avoiding

over-stocking.

(iii) Evolving suitable price strategy to maintain consistent sales.

(iv) Formulating a suitable sales strategy in accordance with the

changing pattern of demand and extent of competition among the

firms.

(v) Forecasting financial requirements for the short period.

(b) Purpose of Long-term Forecasting. The concept of demand

forecasting is more relevant to the long-run than the short -run. It is

comparatively easy to forecast the immediate future than to forecast the

distant future. Fluctuations of a larger magnitude may take place in the

distant future. It is again difficult to give a precise definition of long run.

In a fast developing economy, the duration may go up to 5 or 10 years,

while in a stagnant economy it may go up to 20 years. Moreover, the

time duration also depends upon the nature of the production for

which demand forecasting is to be made. The purposes of long-term

demand forecasting are as follows :

(i) Planning for a new project, expansion and modernisation

of an existing unit, diversification and technological

upgradation. A firm which can easily forecast the demand for

a new product can better compete as compared to its rival

firms and consolidate its position.

(ii) Assessing long-term financial needs. It takes time to raise

financial resources, more particularly when the size of

finance needed for expansion, modernisation and

diversification is very large.

(iii) Arranging suitable manpower. In the long-run, techniques

of production may change. Trained and skilled labour and

business executives may be needed for the new type of job

responsibilities. Demand forecasting can help a firm to

arrange for specialised labour force and personnel.

8.3 METHODS OF DEMAND FORECASTING

Demand forecasting is a very absorbing and difficult exercise.

Making estimates for future under the changing conditions is a difficult

task. Consumer’s behaviour is the most unpredictable thing in the

world because it is motivated and influenced by a multiplicity of forces.

Moreover, economists and statisticians over the years have developed

several methods of demand forecasting. Each of these methods has its

relative merits and demerits. Selection of the right method is essential to

make demand forecasting accurate and credible.

In demand forecasting, a judicious mixture of statistical skill and

rational judgement is needed. Through the use of statistical and

mathematical techniques, data can be collected, classified, tabulated,

analysed and interpreted. But, statistics do not speak for themselves,

they need the skill of a talented analyst to give it meaningful

manifestation. Sound judgement is a prime requisite for good

forecasting. The judgement should be based upon facts and the

personal bias of the investigator should not prevail upon the facts.

Thus, an efficient demand forecasting should strike a balance between

mathematical techniques and sound judgement.

The various methods of demand forecasting can be summarised in

the form of a chart as follows :

8.3.1 OPINION POLL METHOD

In the opinion poll, the opinions of buyers, sales force and

experts could be sought to determine the emerging trend in market

demand.

8.3.1.1 CONSUMER SURVEY METHOD In this method, the representative of the firm approaches buyers

personally to know their views about a particular product and also

their intentions for the likely purchases at a given price in the future -

usually a year. The firm may go in for complete enumeration or for

sample surveys.

In case of complete enumeration, firm has to go for a door-to-

door survey contacting all the households in the region. The major

limitation of this method in that it requires plenty of resources,

manpower and time. Moreover, the burden of opinion is left on the

consumers, who at times may not express their opinion properly or may

deliberately misguide the investigators.

Under the sample survey method, some representative

households are selected on a random basis as samples, and their

opinion is taken as the generalised opinion of the market they belong to.

This method is based on the assumption that the sample truly

represents the population. However, if there are large variations in the

nature and behaviour of the households constituting the population,

demand forecasting based on the opinion poll of the sample

households may prove to be wrong and misleading.

Opinion poll method proves very useful when bulk of sale is

made to industrial producers. In that case, it is known as ‘End-use

Method’ or ‘Input-Output Method’. The demand for the final product is

the end-use demand of the intermediate product used in the

production of this final product. For example, demand for steel is the

intermediate demand for the automobile industry. The end-use

demand estimation of an intermediate product is very difficult because

of the multiple uses of this product. Then, there can be domestic

demand and export demand of an intermediate product, and the

pattern of demand may be totally different in the two markets. Enduse

method may be useful for industries producing producers’ goods

like aluminium.

8.3.1.2 COLLECTIVE OPINION METHOD This is also known as ‘sales force opinion method’. In this method,

instead of consumers, the opinion of the salesmen who are in close

contact with buyers is sought. It is presumed that salesmen, being the

closest to the customers, have the most accurate information about

their liking, disliking, consumption pattern, consumers’ reactions to the

firm’s product, etc. The firm collects information from the salesmen

and on the basis of their response it forecasts demand. Sometimes the

firm does not take the opinion of the individual salesman for granted.

It may revise the estimates taking into account over-optimism and

pessimism on the part of salesmen. The firm may also take into

account the likely changes in the prices, changes in designs and

packing, changes in income distribution, employment, etc. The chief

merit of this method lies in the collective wisdom of salesmen.

Besides, this method does not require the use of intricate

statistical techniques. Forecasts may be more authentic because these

are based on the direct contacts and first-hand knowledge of the

salesmen. This method is particularly more useful in forecasting sales of

new products.

The method has certain demerits. First, the results of the

forecasts depend exclusively on the opinion of the salesmen. At times

salesmen can use their personal bias. Consequently, the whole

investigation is vitiated. Second, this method is suitable only for the

short -term forecasting. However, most firms have to plan for future

which is most uncertain, and forecasting by this method may not serve

that purpose. Thirdly, salesmen lack vision and may not foresee the

influence of several unknown factors that may affect the demand

pattern in the market.

8.3.1.3 EXPERT’S OPINION METHOD Instead of depending upon the opinion poll of buyers, firms can obtain

views of the specialists or experts. This is also known as ‘Delphi

Technique’ of investigation. This provides data relating to the

responses of a panel of experts to another group of experts,

maintaining secrecy of their identity. Another group of experts may

agree or disagree to the responses of the earlier group. In case of

disagreement, the information is passed on to the previous group,

which may either revise its forecast or explain reasons for the

disagreement. The process goes on until some sort of unanimity is

arrived at among all the experts forecasting.

This method is best suited in situations where intractable

changes are occurring. It also has the advantages of speed and

cheapness.

8.3.2 STASTITICAL METHODSStatistical techniques have proved to be very useful in demand

forecasting. In order to maintain objectivity and precision in demand

forecasting, statistical techniques are used. The important statistical

methods used in demand forecasting are as follows :

8.3.2.1 TREND PROJECTION METHODS

Output and sales of a firm may increase or decrease over a

period of time. However, it has a distinct tendency either to increase or

decrease in the long run. Such long-run tendency of a time-series to

increase or decrease over a period of time is known as trend. Several

methods can be used to measure the trend, the important among

these are as follows :

(i) Graphic Method. This is the most simple technique to

determine the trend. All values of output or sale for different years are

plotted on a graph and a smooth freehand curve is drawn passing

through as many points as possible. The direction of this free-hand

curve-upward or downward -shows the trend.

The disadvantage of this method is that it may show the trend but

cannot measure it. Similarly, smoothing of fluctuations by a

freehand curve may leave chances of bias on the part of the

investigator.

(ii) Least Squares Method. The least squares method is a

mathematical procedure for fitting a line to a set of observed data

points such that the sum of the squared deviations between the

calculated and observed values is minimised. In estimation, both

positive and negative errors may arise. We square all the these errors

and try to minimise the sum of squares of these errors. Hence the

name of the method is ‘least squares method’. This technique is used to

find a trend line which ‘best fits’ the available data.

8.3.2.2 BAROMETRIC TECHNIQUES

The barometric technique of demand forecasting is based on the

assumption that the future can be predicted from certain events

occurring in the present. We need not depend upon the past

observations for demand forecasting. Different economic indicators

such as income, population, expenditure, investment, etc., can be

used to predict the market trend.

For example, index of farm income can be a good indicator for

estimating demand for agricultural inputs like fertilizers, tractors, etc.

Similarly, personal income can be a good indicator for estimating

demand for consumer goods.

Data relating to economic indicators is published by specialised

organisations.

In order to use barometric techniques for demand forecasting

certain steps have to be followed :

To determine whether a relationship exists between the demand for a

product and certain economic indicator.

Establishing relationship between demand and economic indicator

through the method of least squares and deriving the regression

equation. In case the relationship is linear, equation will assume the

form y = a + bx. For non-linear relationship, parabolic functions can

be used.

Once regression equation is derived, the value of y, i.e., demand, can be

forecasted for a given value of x.

Past data may not prove adequate for forecasting, therefore, the

investigator should use his judgement taking into consideration the

new factors as well.

Certain limitations arise in the use of this method of forecasting. For

example, it is not always possible to get an appropriate indicator. In case

of new product, no past data exist hence forecasting becomes difficult.

The success of this method depends upon the time-lag between an

economic indicator and demand. If no time-lag exists, use of this method

becomes difficult.

8.3.2.3 REGRESSION METHOD

Regression method is frequently used in demand forecasting.

Under this method, relationship is established between quantity

demanded and one or more independent variables such as income,

price of the related goods, price of the commodity under consideration,

advertisement cost, etc. In regression, a quantitative relationship is

established between demand which is a dependent variable and the

independent variables, i.e., determinants of demand.

Let us suppose that we have two variables y and x, where y is

dependent on x. It can be expressed in the form of the equation as

follows :

y a bx Since this is a linear relation, a study of regression in this case will

be that of linear regression. If the relation is curvilinear, the study of

regression in such a case in called curvilinear regression.

8.3.3 FORECASTING METHODS USED

Forecasting is done by two methods viz .trend analysis and

regression analysis. In trend analysis the past data are extraplorated

as per the trend seen in the history. In the regression analysis method

the variables are regressed with some key economic indicators and a

relationship is formed. Then that equation is used to project values for

the future.

Polyester staple fibre is used by the downstream industries to

produce spun yarns. Spun yarns are of three type viz. pure cotton,

blends and non cotton. The blends can be a combination of any of the

following components cotton, polyester, viscose and acrylic and

sometimes pp which is rare e.g. cotton/polyester, cotton/viscose ,

polyester/viscose, polyester/cotton etc. The production of spun yarns and

cloths in the down stream industry constitute the demand for PSF, ASF,

VSF.

Once the amount of cloth consumption is fixed the components

consumption vary among themselves according to the availability

,price ,fashion awareness ,use( apparel ,industrial,medical etc) etc.

8.4 DETERMINING WORLD FIBER CONSUMPTION

World Fiber Consumption- Table-59

'000 tonnes

Year Population ConsumptionNatural * Manmade TOTAL billion kg / capita

1950 7.72 1.68 9.40 2.56 3.70

1960 11.61 3.37 14.97 3.04 4.90

1965 13.35 10.68 24.03 4.09 5.90

1970 13.40 5.49 18.89 3.35 5.60

1975 13.48 8.39 21.88 3.71 5.90

1980 15.19 14.63 29.82 4.53 6.60

1981 15.23 14.30 29.53 4.46 6.601982 15.47 13.60 29.07 4.61 6.30

1983 15.71 14.85 30.56 4.69 6.50

1984 16.24 15.76 32.00 4.77 6.701985 17.73 16.26 33.99 4.85 7.00

1986 19.46 22.61 42.07 5.61 7.50

1987 19.60 23.59 43.19 5.69 7.601988 19.63 20.77 40.40 5.53 7.30

1989 19.67 20.48 40.15 5.54 7.40

1990 19.74 19.74 39.48 5.37 7.401991 19.99 28.30 48.29 5.92 8.20

1992 20.19 27.52 47.71 5.85 8.20

1993 20.24 24.68 44.92 5.77 7.801994 20.64 17.86 38.50 5.02 7.70

1995 20.74 16.89 37.63 4.97 7.60

1996 21.07 18.54 39.62 5.11 7.80

1997 21.27 29.40 50.67 6.00 8.40

1998 21.41 18.94 40.35 5.20 7.80

1999 21.46 19.38 40.84 5.28 7.70

2000 21.51 31.15 52.65 6.08 8.70

2001 22.01 31.60 53.60 6.15 8.70

2002 22.61 35.10 57.70 6.34 9.10

2003 22.75 33.46 56.21 6.23 9.00

2004 22.93 34.43 57.36 6.35 9.102005 23.28 35.15 58.44 6.42 9.19

2006 23.63 35.88 59.51 6.50 9.27

2007 23.98 36.60 60.59 6.58 9.352008 24.34 37.33 61.67 6.64 9.44

2009 24.69 38.06 62.74 6.72 9.52

2010 25.04 38.78 63.82 6.79 9.60Source; Fiber Year Saurer 2003- 2004

* Ramie, flax, hemp, jute, sisal and coir not included

8.4.1 PROJECTION FOR MANMADE FIBRE GROWTH

Double Exponential Smoothing: Manmade

year Forecast Lower Upper

2004 34.4290 26.4019 42.45602005 35.1542 23.8209 46.48762006 35.8795 21.0260 50.73312007 36.6048 18.1391 55.07052008 37.3301 15.2052 59.45502009 38.0553 12.2443 63.86642010 38.7806 9.2665 68.2947

The development over the last decade has shown that 82% of the additional volume consumed has come from synthetics. While cellulosics’ increase averaged at 0.6% annually, cotton showed an average annual growth of 1.7% and synthetics jumped up by 5.9%. In other words, 14 out of 17 million tonnes of additional demand was met by synthetic fibers over the period 1993 to 2003. This trend is commonly expected to continue. The growth of synthetic fibre is expected to reacha 40 KTA by 2010. the growth of manmade fibre iis in the rising trend due to better technology,cost effctive and novel manmade fibres produced over the years. 8.4.2 PROJECTION FOR NATURAL FIBRE GROWTH

Double Exponential Smoothing: Natural Fibres

Year Forecast Lower Upper

2004 22.9313 22.2845 23.57812005 23.2825 21.8053 24.75962006 23.6336 21.3206 25.94672007 23.9848 20.8347 27.13492008 24.3360 20.3485 28.32362009 24.6872 19.8620 29.51242010 25.0384 19.3754 30.7013

Growth of natural fibre is sluggish it is expected to reach 25 Mn

Tonnes by 2010. Total manmade fibre consumption has grown by a

blooming 20.5 times leaving behind the natural fibre growth at a rate

of 2.9times. Nevertheless, in apparel end-uses, accounting for more

than half the world’s fiber demand, natural fiber is preferred for

reasons of comfort. Relative pricing disadvantages as well as natural

restrictions argue against a cotton-dominated textile industry.

Technical innovations to imitate nature and to make fibers more

natural will be the key to success. This would also address growing

public concerns about the environment by making fibers biodegradable

and manufacturing them from renewable resources.

8.4.3 WORLD FIBRE CONSUMPTION Vs POPULATION

KTA

billion WORLD FIBRE CONSUMPTION Vs POPULATIONLog. (KTA)

Log. (billion)70.00 7.00

60.00 6.00

50.00 5.00

40.00 4.00

30.00 3.00

20.00 2.00

10.00 1.00

0.00 0.00

YEAR

Wo

World fibre consumtion and population increase seem to be highly correlated. World population of 6.34 billion corresponds to an

average per capita consumption of 9.9 kg. Manmade fibers accounted for 35.10 million tonnes (+4.9%), comprising a 55.8% market share. Cotton, wool and silk declined by 0.6% to 22.61 million tonnes. On a world basis, demand for fibers from the first two groups has

increased by 2.7%. As in the recent years, the manmade fibers

performance exceeded that of cotton in terms of the growth rate..

Since the beginning of the 90’s manmade fibers have been the most

important fiber type in terms of volume. Manmade fibers managed to

perform with an average annual growth rate of 4.7% while natural

fibers accounted for a mere 0.4% annual increase in average. With

some exceptions in the early- and mid-eighties, filament yarns have

developed stronger than staple fibers. Over the past fifteen years,

filament yarns - most commonly further processed via texturing or

twisting - have enjoyed an average annual growth of 6.0%. Staple

fibers have increased by 1.4%, of which cotton and wool by 0.5% and

manmade staple fibers by 2.8%. Staple fibers are the raw material for

spinning of staple fiber yarns (synonym: spun yarn) and for

manufacturing of drylaid nonwovens.

8.4.4 NATURAL Vs MANMADE FIBRE CONSUMPTION

NATURAL Vs MANMADE FIBRES Natural *Manmade

45.00

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00

YEAR

After the mid 80’s manmade fibre consumption zooms past the natural

fibre growth. The growth rate of natural fibres is @ 0.4% whereas the

growth rate of manmade fibre is @ 4.7%. World natural fibre

consumption shows a compounded growth rate of 2.1 % from 22.75

KTA to 26.89 KTA in 2010.The trend line shows that the growth rate is

decreasing.This may be due to the advent of synthetic fibres with

more and more competitive prices and with better feel. World

Consumption of mmf have increased from 1.68 kta to 33.5 kta per

annum a 13.56 times rise in the last 50 years.

Consumption pattern seems to be increasing from 9.0 kg per cap to

around 10 kg per cap by 2010. This is due to the changing buying

behaviour and fashion consciousness among the people. Still now the

consumption of India is as low as 2.1 kg against 5.5 kg in the US and

Europe.

Table-59 Natural Fibers Mn Tonnes

Cotton Wool Silk TOTAL ± in %

1950 6.647 1.057 19 7.723 n/a1960 10.113 1.463 31 11.607 4,2%

1965 11.884 1.484 33 13.401 2,9%

1970 11.784 1.659 41 13.484 0,1%1975 11.723 1.578 48 13.349 -0,2%

1980 13.575 1.599 53 15.227 2,7%

1981 13.516 1.616 57 15.189 -0,2%1982 13.782 1.632 55 15.469 1,8%

1983 13.993 1.657 55 15.705 1,5%

1984 14.44 1.744 56 16.24 3,4%

1985 15.929 1.744 59 17.732 9,2%

1986 18.891 1.789 63 20.743 17,0%

1987 18.743 1.832 63 20.638 -0,5%1988 19.122 1.886 64 21.072 2,1%

1989 19.388 1.955 66 21.409 1,6%

1990 19.406 1.988 66 21.46 0,2%1991 17.745 1.928 67 19.74 -8,0%

1992 17.87 1.736 67 19.673 -0,3%

1993 17.885 1.678 68 19.631 -0,2%1994 17.774 1.618 69 19.461 -0,9%

1995 17.998 1.51 92 19.6 0,7%

1996 18.727 1.439 71 20.237 3,3%1997 18.69 1.424 75 20.189 -0,2%

1998 18.527 1.386 77 19.99 -1,0%

1999 19.82 1.363 83 21.266 6,4%2000 20.077 1.342 86 21.505 1,1%

2001 20.605 1.316 88 22.009 2,3%

2002 21.385 1.27 92 22.747 3,4%2003 21.272 1.243 91 22.606 -0.6%

2004 21.57 1.22 91.83 22.78 0.8%

2005 21.99 1.18 93.99 23.17 1.7%2006 22.41 1.15 96.14 23.56 1.7%

2007 22.83 1.12 98.29 23.95 1.6%

2008 23.25 1.09 100.44 24.34 1.6%2009 23.67 1.05 102.60 24.72 1.6%

2010 24.09 1.02 104.75 25.11 1.6%

Source; Fiber Year Saurer 2003- 2004

* Ramie, flax, hemp, jute, sisal and coir not included

World Production of Synthetic Fibers -Mn Tonnes-Table-64 Polyester Polyamide Acrylics Others TOTAL Polyester Polyamide Acrylics Others

1970 34% 40% 21% 5% 4.809 1.64 1.92 1.01 0.241975 45% 33% 19% 3% 7.461 3.36 2.46 1.42 0.221980 47% 30% 19% 4% 10.779 5.07 3.23 2.05 0.431985 50% 26% 18% 6% 13.025 6.51 3.39 2.34 0.781986 50% 26% 18% 6% 13.645 6.82 3.55 2.46 0.821987 52% 25% 17% 6% 14.578 7.58 3.64 2.48 0.871988 53% 25% 16% 6% 15.172 8.04 3.79 2.43 0.911989 54% 24% 15% 7% 15.602 8.43 3.74 2.34 1.091990 53% 24% 14% 9% 16.191 8.58 3.89 2.27 1.461991 54% 22% 14% 10% 16.814 9.08 3.70 2.35 1.681992 56% 21% 13% 10% 17.693 9.91 3.72 2.30 1.771993 57% 20% 13% 10% 18.022 10.27 3.60 2.34 1.801994 58% 18% 13% 11% 19.779 11.47 3.56 2.57 2.181995 60% 19% 12% 9% 20.621 12.37 3.92 2.47 1.861996 61% 18% 12% 9% 21.81 13.30 3.93 2.62 1.961997 63% 16% 11% 10% 24.644 15.53 3.94 2.71 2.461998 65% 15% 10% 10% 25.521 16.59 3.83 2.55 2.551999 66% 15% 9% 10% 26.821 17.70 4.02 2.41 2.682000 66% 14% 9% 11% 28.389 18.74 3.97 2.56 3.122001 67% 13% 9% 11% 28.934 19.39 3.76 2.60 3.182002 68% 13% 9% 10% 30.694 20.87 3.99 2.76 3.072003 69% 12% 8% 10% 32.175 22.20 3.86 2.57 3.222004 70% 12% 8% 10% 33.29 23.39 3.91 2.58 3.412005 71% 11% 7% 10% 34.71 24.64 3.92 2.60 3.552006 72% 11% 7% 10% 36.13 25.88 3.94 2.62 3.692007 72% 11% 7% 10% 37.55 27.13 3.95 2.64 3.832008 73% 10% 7% 10% 38.97 28.38 3.96 2.66 3.972009 73% 10% 7% 10% 40.39 29.62 3.98 2.68 4.11

2010 74% 10% 6% 10% 41.81 30.87 3.99 2.70 4.25

8.4.17 WORLD REGION WISE GROWTH OF DIFFERENT FIBRE

Table-69

mill. tonnes 1995 1996 1997 1998 1999 2000 2001 2002 2003PES FY 6.7 7.1 8.5 9.4 10.1 10.7 11.2 12 12.4 7%

GROWTH% 6% 20% 11% 7% 6% 5% 7% 3%PES SF 5.6 6 6.9 7 7.6 8.1 8.3 8.8 9.4 6%

GROWTH% 7% 15% 1% 9% 7% 2% 6% 7%PA FY 3.2 3.3 3.5 3.4 3.4 3.6 3.3 3.5 3.4 1%

GROWTH% 3% 6% -3% 0% 6% -8% 6% -3%PA SF 0.6 0.6 0.6 0.6 0.5 0.5 0.4 0.5 0.5 -2%

GROWTH% 0% 0% 0% -17% 0% -20% 25% 0%PP 2 2.2 2.4 2.5 2.6 2.8 2.9 3 3 5%

GROWTH% 10% 9% 4% 4% 8% 4% 3% 0%PAN 2.4 2.5 2.7 2.5 2.5 2.6 2.6 2.7 2.7 1%

GROWTH% 4% 8% -7% 0% 4% 0% 4% 0%Cellulosics * 3 2.9 2.9 2.8 2.6 2.8 2.7 2.8 2.9 0%

GROWTH% -3% 0% -3% -7% 8% -4% 4% 4%Others 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.3 13%

GROWTH% 0% 0% 100% 0% 0% 50% 0% 0%TOTAL 23.6 24.7 27.5 28.3 29.4 31.1 31.6 33.5 35.1 5%

GROWTH% 5% 11% 3% 4% 6% 2% 6% 5%Source; Fiber Year Saurer 2003 -2004 * since 2002 with Lyocell included

World natural fibre consumption shows a compounded growth rate of

2.1 % from 22.75 KTA to 26.89 KTA in 2010.The trend line shows that

the growth rate is decreasing.This may be due to the advent of

synthetic fibres with more and more competitive prices and with better

feel. World Consumption of mmf have increased from 1.68 kta to 33.5

kta per annum a 13.56 times rise in the last 50 years.

Consumption pattern seems to be increasing from 9.0 kg per cap to

around 10 kg per cap by 2010. This is due to the changing buying

behaviour and fashion consciousness among the people. Still now the

consumption of India is as low as 2.1 kg against 5.5 kg in the US and

Europe.Except for a appreciable growth rate in polyester production

which grew from 8.58 Mn Tonns in 1990 to 22.2 Mn tonnes in 2003 an

World Production of Manmade Fibers-Table-70 mill. tonnes 1995 1996 1997 1998 1999 2000 2001 2002 2003 CARG%PR China 3.2 3.5 4.3 5.2 5.8 6.7 8.2 9.9 11.7 15%

GROWTH% 9% 23% 21% 12% 16% 22% 21% 18%U.S. 4.2 4.2 4.4 4.3 4.1 4.2 3.6 3.8 3.8 -1%

GROWTH% 0% 5% -2% -5% 2% -14% 6% 0%Taiwan 2.6 2.7 3.1 3.3 3.1 3.2 3.1 3.2 3.2 2%

GROWTH% 4% 15% 6% -6% 3% -3% 3% 0%South Korea 1.9 2.1 2.5 2.5 2.7 2.8 2.4 2.3 2.2 2%

GROWTH% 11% 19% 0% 8% 4% -14% -4% -4%India 1 1.2 1.5 1.6 1.8 1.9 1.9 2 2 8%

GROWTH% 20% 25% 7% 13% 6% 0% 5% 0%Indonesia 0.9 1 1.1 1.1 1.2 1.4 1.5 1.4 1.4 5%

GROWTH% 11% 10% 0% 9% 17% 7% -7% 0%Japan 1.7 1.7 1.8 1.7 1.5 1.5 1.5 1.3 1.2 -4%

GROWTH% 0% 6% -6% -12% 0% 0% -13% -8%SUBTOTAL 15.5 16.4 18.7 19.7 20.3 21.7 22.1 23.9 25.6 6%ROW 8.1 8.3 8.8 8.6 9.1 9.4 9.5 9.6 9.6 2%

TOTAL 23.6 24.7 27.5 28.3 29.4 31.1 31.6 33.5 35.1 5%

CARG% of 8% Among theother fibres the growth of polyamide nylon and

nylon-66 is showing a negative gtowth rate.And acrylic fibre

shows a growth CAGR% of 1% .The growh rate of polyester is 14

times in the last 23 years against where as polyamides have grown by 2

times and acrylic by 3 times.

8.4.18 YARN CONSUMPTION SHort staple spindles: Table-71

million PR China India Pakistan USA Brazil Turkey

2002 49.07 36 9.08 2.49 3.6 5.98

2003 57.5 33.88 9.26 1.96 3.67 6.4

± in % 17.20% -5.90% 2.00% -21.30% 1.90% 7.00%

Open end rotors:

‘000 PR China India Pakistan USA Brazil Turkey

2002 900 386 145 738 322 5072003 1 379 148 642 330 530

± in % 11.10% -1.80% 2.10% -13.00% 2.40% 4.50%

Source; Fiber Year Saurer 2003- 2004

In the last two years a lot of investments is seen in China the short

staple spindle investment shows a 17.2 % rise over the previous year

and rotor increased by 11.1%.. Similar growth rate is sen in Pakistan

2%,Brazil 1.9%-SS-Spindle and rotor-2.% whereas in Turkey the %

increase in SS-Spindle is 7% and Rotor is 4.5%. In India and US the

no. of spindle and rotor increase is negative over the previous year.

Last year’s output of filament yarn was 18.9 million tonnes. The 5.3%

increase derived from stronger demand for textile and industrial yarns.

This rise in consumption has been supported by higher production

levels and increasing world capacity. The world filament yarn market

comprises cellulosic and synthetic fibers for textile, industrial and

carpet applications

a) Textile Yarn

The textile filament yarn segment serves a broad range of applications

from apparel to home textiles. In 2003, output increased by 6.4% to

14.6 million tonnes. Some 83% of the textile end-uses come from

polyester, that managed to further grow by 7.6% to 12.0 million

tonnes. China,India, South Korea,and Taiwan account for 77%of all

manufactured polyester textile filaments. .

Micro filaments are on their way to becoming commodities. Large new

capacity of some ten thousands of tonnes of sea island yarns in PR

China has led to a drastic drop in prices by about 50% in the Asian

market.

Polyamide textile filaments stagnated at 1.6 million tonnes with a

decreasing consumption for fine yarns . This decline was more than

offset by favorable conditions for coarser yarns and micro filaments for

underwear and sports clothing.

Cellulosic textile filament yarns discontinued their downward trend and

increased by 3.9% topping 0.4 million tonnes.

Polypropylene filaments, predominantly used in carpets, showed a

further tendency to enter new market niches for textile applications.

The demand for upholstery, sport and functional textiles show a

healthy growth.

According to the spinning process, textile yarns are split into in POY

and FDY. Partially oriented yarns, accounting for about 75% of the

world market, require further processing before manufacturing fabrics.

With respect to the volume, texturing is the most popular process to

finally draw the yarns, giving them a comfortable feeling called “textile

touch”.

Air-jet textured yarns take in a 8% market share in terms of number

of positions

b) Industrial Yarn

The market of high-tenacity yarns essentially comprises polyester,

polyamide, polypropylene and viscose yarns, predominantly used in

the automotive industry as reinforcing or composite materials.

Polyamide leads the world market with a 44% share, followed by

polyester comprising a 38%Share.Polypropylene with major usage in

ropes, nets, twines and belts also increased.

Spun Yarn

Staple fibers are the raw material for the spun yarn and nonwovens

production. The global amount of staple fibers being further processed

slightly increased by 1.4% to 38.83 million tonnes with natural fibers

taking in a 58% share. With the exception of cellulosics and polyester,

production of all the remaining types declined in a range from 0.2% to

1.9%. The global supply of staple fibers can be split into the following

three subsequent processing technologies:

a) Short Staple

The world short staple spun yarn production increased by 1.3% to

30.8 million tonnes. The three spinning technologies - ring, rotor and

air jet spining - cover with their different focus on applications the

entire range concerning fineness and input material.

PR China, the unquestioned leader in terms of production and installed

equipment in this sector, rose production by 16% to 9.3 million

tonnes. This is three times the output of second ranked India. The

number of installed spindles went up by 17.2% to 57.5 million. The

trend to further expand automated rotor spinning positions has

continued as the considerable portion of last year’s installations

proved. Based on the fact, that such machines have at least twice as

much productivity than manually operated machines, the domestic

capacity in rotor spinning has witnessed above average increases in

the previous year.

The output of spun yarn in India remained almost at the level of the

previous years at 3 million tonnes. The majority of 69% was cotton

yarn, followed by 20% blends and 11% non-cotton yarn. One bright

spot in last year’s performance was the 17% rise in the hosiery sector.

The Indian textile industry witnessed a 5% decline in spinning and

composite mills at 1,784, leading to a decline in installed spindles by

roughly 6% to 33.88 million. The number of rotors remained at nearly

379,000 despite below-average shipments of some 3,500 new

positions. The cyclic investments in rotor spinning capacity has

continued. Based on the fact that a rotor spinning machine has a

seven times higher efficiency than a ring spinning machine, about 5 to

10% from all Indian made yarns are coming from rotor spinning. Last

year’s emphasis was on semi-automatic equipment.

India is considered by many U.S. firms the primary alternative to PR

China. Over the long term, competitiveness may diminish as strong

economic growth leads to greater domestic demand for textiles and

apparel, and for the labor and capital to make these goods. Apparel will

continue to decline, like sheeting and bath products. Technical

products may remain strong, but in relative volume, they are nothing

compared to cotton and polyester/cotton short staple.The major

producing nations like China, India, Pakistan, United States, Brazil and

Turkey produced more than 19 million tonnes in 2003. This comes to a

63% share of the global industry.

b) Long Staple

While the long-staple spinning industry has traditionally focused on the

processing of wool, today it is increasingly dominated by manmade

fibers.Long staple fiber production marginally decreased by 2.0% to

3.9 million tonnes, of which wool comprised approximately 1.27 million

tonnes (clean basis). The number of newly installed spindles remained

at the 2002 level of about 350,000. This number also takes into

consideration the flow of second hand machinery, of which for example

a large portion was directed to Turkey. The major end-uses are

apparel, accounting for about half the world market, blankets,carpets

and hand-knitting yarns.Big winners expected from the release of

global quotas in 2005 will be China, Pakistan,India, Turkey and

Bangladesh - the same countries as in the short staple spun yarn

business. China, is taking the lead in this sector as well, and following

a period of capacity reduction- particularly of obsolete long staple

processing equipment - has now begun to increase its investments in

184

new and modern capacity. Business confidence has picked up in the

wool

textile pipeline, particularly at combing and worsted weaving. Worsted

spinners, however, considered it difficult to sustain output growth on the

back of erratic ordering.

World yarn production

The global amount of filament and spun yarns accounted for 53.5

million tonnes representing a 2.4% increase over 2002. Although short

staple yarn still dominates the world market with a 57.5% share,

filament yarns have shown a more dynamic development over the

period with an average annual growth rate of 5.1% comprising a

33.4% share compared with 20.7% in 1980. Short staple yarns just

account for an average annual growth rate of 1.9% over this period.

8.5 DETERMINING DOMESTIC CONSUMPTION

8.5.2 PROJECTION FOR DOMESTIC CAPITAL FORMATION

Gross domestic capital formation Table -73

1990-91 134381

1991-92 1331331992-93 151781

1993-94 180491

1994-95 2292651995-96 288710

1996-97 310887

1997-98 3461471998-99 362775

1999-2000 428127

2000-2001 4567202001-2002 504461

2002-2003 542351

Double Exponential Smoothing

Data Gross domestLength 13.0000NMissing 0

Smoothing ConstantsAlpha (level): 1.02186Gamma (trend): 0.03312

Accuracy MeasuresMAPE: 5MAD: 13387MSD: 2.95E+08

Period Forecast Lower Upper

2003-04 573692 540894 6064902004-05 604891 554054 6557282005-06 636090 566348 7058312006-07 667288 578327 7562492007-08 698487 590158 8068162008-09 729685 601908 8574632009-10 760884 613609 908159

Double Exponential Smoothing for Gross domestic Capital Formation

900000

700000

500000

300000

100000

1990-91

Year

Act ual

Predicted

Forecast

Act ual

Predicted

Forecast

Smoothing Const ants

Alpha (level): 1.022Gamma (trend) : 0.033

MAPE: 5MAD: 13387MSD: 2.95E+ 08

2002-03 2009-10

8.5.3 PROJECTION FOR DOMESTIC SAVINGS

Double Exponential Smoothing

Gross domestic savingsTable -74

1990-91 118030

1991-92 1295991992-93 146501

1993-94 175803

1994-95 2109231995-96 269391

1996-97 298451

1997-98 3211241998-99 346794

1999-2000 408746

2000-2001 4453022001-2002 494394

2002-2003 532601

Data Gross domestLength 13.0000NMissing 0Smoothing ConstantsAlpha (level): 1.19103(actual) 1.19103(adjusted)Gamma (trend): -0.00443(actual) 0.01000(adjusted)Accuracy MeasuresMAPE: 7MAD: 13990MSD: 3.15E+08Period Forecast Lower Upper

2003-04 568546 534271 6028222004-05 604595 545030 6641612005-06 640644 555003 7262862006-07 676693 564737 7886502007-08 712742 574369 8511162008-09 748791 583947 9136352009-10 784840 593495 976186

Double Exponential Smoothing: Gross Domestic Saving

gross domestic savings

1000000

800000

600000

400000

200000

1990-91

Year

Actual

Predicted

Forecast

Actual

PredictedForecast

Smoothing ConstantsAlpha (level): 1.191Gamma (trend): 0.010

MAPE: 7

MAD: 13990MSD: 3.15E +08

2002-03 2009-10

8.5.4 PROJECTION FOR GDP

GDP at current price Rs Crrores -Table-75

1990-91 510954

1991-92 5890861992-93 6599161993-94 781345

1994-95 9170581995-96 10732711996-97 1243547

1997-98 13901481998-99 1598127

1999-2000 1761838

2000-2001 1902998

2001-2002 2090957

2002-2003 2249493

2003-2004 2429452.442004-2005 2623808.6352005-2006 2833713.326

2006-2007 3060410.3922007-2008 3305243.2232008-2009 3569662.6812009-2010 3855235.696

GDP is assumed to grow at a rate of 8% per annum.

8.5.5 PROJECTION FOR GNP

Regression Analysis: GNP at current price versus GDP at current price Table -76

GNP at current price GDP at current price

1990-91 503409 510954

1991-92 579009 589086

1992-93 661576 659916

1993-94 769265 781345

1994-95 903975 917058

1995-96 1059787 1073271

1996-97 1230465 1243547

1997-98 1376943 1390148

1998-99 1583159 1598127

1999-2000 1746407 1761838

2000-2001 1885713 1902998

2001-2002 2078871 2090957

2002-2003 2230272 2249493

The regression equation isGNP at current price = - 4482 + 0.994 GDP at current price

S = 3827 R-Sq = 100.0% R-Sq(adj) = 100.0%

Analysis of VarianceSource DF SS MS F PRegression 1 4.15683E+12 4.15683E+12 283831.13 0.000Residual Error 11 161099611 14645419Total 12 4.15699E+12

PROJECTIONS FOR GDP AND GNP AT CURRENT PRICE-Table-77

YEAR 2003-20042004-20052005-20062006-20072007-20082008-20092009-2010

GNP at current price 2410394 2603584 2812229 3037566 3280930 3543763 3827622

GDP at429452

current price 22623809 2833713 3060410 3305243 3569663 3855236

8.5.6 PROJECTION FOR CLOTH AVAILIBILITY

Double Exponential Smoothing:

CLOTH AVAILIBILITY SQCM -Table-78

1990-91 241400

1991-92 228700

1992-93 245000

1993-94 262200

1994-95 259800

1995-96 279900

1996-97 293000

1997-98 309200

1998-99 281900

1999-00 305500

2000-01 306800

2001-02 319700

2002-03 313700

2003-04 312400

2004-05 323367

2005-06 333699

Data CLOTH AVAILIBILITY

N 17

N Missing 0

Smoothing Constants

Alpha (level): 0.523369

Gamma (trend): 0.087055

Accuracy Measures

MAPE: 3

MAD: 8974

MSD: 1.44+08

PERCAPITA CLOTH AVAILIBILITY INSQCM

420000

320000

220000

Actual

Predicted

Forecast

Actual

Predicted

Forecast

Smoothing Constants Alpha (level) : 0.52

Gamma (trend): 0.08YR Forecast Low

2007-08 348472 3262008-09 355206 3292009-10 361941 3332010-11 368676 3362011-12 375411 338

1990-91 1999-2000YEAR MAPE:

2009-20103

FORECAST FOR CLOTH AVAILIBILITY IN SQCM YR

Forecast Lower Upper

2007-08 348472 326484 370459

2008-09 355206 329992 380421

2009-10 361941 333166 390716

2010-11 368676 336117 401235

2011-12 375411 338914 411908

regression analysis- cloth availability in sqcm vs gnp, gdp, population,

gds, gdcf & index of industrial production.

The regression equation is CLOTH AVAILIBILITY SQCM = 75007 - 0.010 GNP at current price

+ 0.092 GDP at current price + 0.293 Population - 1.12 Gross domestic savings + 1.20 Gross domestic capital formatio - 1665 Index of Industrial production

S = 10278 R-Sq = 95.7% R-Sq(adj) = 93.7%Analysis of VarianceSource DF SS MS F PRegression 6 30389620851 5064936809 47.94 0.000Residual Error 13 1373335380 105641183Total 19 31762956231

The p value and the R-sq value shows that the the prediction is highly significant.

Cloth availability is the basis on which the consumption of the amount of

yarn produced is computed. The rate at which the availability of

cloth is growing shows that the consumption pattern is changing.

People are becoming more fashion conscious and the buying behaviour

change is also taking its toll.

8.5.7 PROJECTION FOR COTTON YARN PRODUCTION

COTTON yarn prodn in Mn kg-Table79

Year

1990-91

1991-92

1992-931993-94

1994-95

1995-961996-97

1997-98

1998-991999-00

2000-01

2001-022002-03

2003-04

2004-05

2005-06

The regression equation is

prodn

1510

1450

15231622

1586

18942148

2213

20222204

2267

22122177

2475

2552

2630

Regression Analysis:COTTON yarn versus CLOTH AVAILI, GNP at curre, ...

COTTON yarn prodn in Mn kg = - 147 + 0.0127 CLOTH AVAILIBILITY SQCM

- 0.00123 GNP at current price + 0.00118 GDP at current price - 0.00443 Population + 0.00656 Gross domestic savings - 0.0126 Gross domestic capital formatio + 36.2 Index of Industrial production

S = 98.24 R-Sq = 96.1% R-Sq(adj) = 90.7%

Analysis of Variance

Source DF SS MS F PRegression 7 1198668 171238 17.74 0.003Residual Error 5 48252 9650Total 12 1246920The p value and the R-sq value shows that the the prediction is highly significant.

PROJECTION FOR COTTON YARN PRODN IN Mn Kgs -Table-80

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

2253.663 2445.77 2630.908 2873.613 3015.139 3157.405 3300.095

Cotton yarn prodn is expected to rise to 3300 Mn Kgs by 2010.The

more the yarn is produced less will be the demand for PSF as psf is

one of its close substitute.

8.5.8 PROJECTION FOR BLENDED YARN PRODUCTION

Blended Yarn Prodn in Mn Kgs-Table-81

Year BLENDED yarn prodn inMn kg

1990-91 2101991-92 2371992-93 253

1993-94 3111994-95 3511995-96 3951996-97 4841997-98 583

1998-99 5951999-00 6212000-01 6462001-02 6092002-03 585

Regression Analysis: BLENDED yarn versus CLOTH AVAILI, GNP at curre, ...

The regression equation is BLENDED yarn prodn in Mn kg = - 1937 + 0.00333 CLOTH AVAILIBILITY SQCM

- 0.00124 GNP at current price + 0.00173 GDP at current price + 0.00061 Population - 0.00225 Gross domestic savings - 0.00240 Gross domestic capital formatio + 12.7 Index of Industrial production

S = 35.69 R-Sq = 98.0% R-Sq(adj) = 95.3%

Analysis of Variance

Source DF SS MS F PRegression 7 318520 45503 35.72 0.001Residual Error 5 6369 1274Total 12 324889The p value and the R-sq value shows that the the prediction is highlysignificant.

PROJECTION FOR BLENDED YARN PRODN IN Mn Kgs-Table822003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

665.2582 750.129 840.3599 953.4951 1048.628 1153.296 1268.317

Blended yarn constitute of any of the combination of cotton,polyester

viscose and acrylic components in a ratio as per requirement. The

more the demand for blended yarn the more will be the demand for the

components.

Regression Analysis: TOTAL yarn p versus CLOTH AVAILI, GNP at curre, ... Table -83

NONCOTTON yarn prodn in Mn kg TOTAL yarn prodn in Mn kg

1990-91 104 1824

1991-92 118 1805

1992-93 119 1895

1993-94 134 2067

1994-95 153 2090

1995-96 196 2485

1996-97 162 2794

1997-98 177 2973

1998-99 191 2808

1999-2000 221 3046

2000-2001 247 3160

2001-2002 280 3101

2002-2003 319 3081

The regression equation is TOTAL yarn prodn in Mn kg = - 2070 + 0.0147 CLOTH AVAILIBILITY SQCM

- 0.0028 GNP at current price + 0.0031 GDP at current price - 0.00297 Population + 0.0044 Gross domestic savings

- 0.0129 Gross domestic capital formatio + 43.3 Index of Industrial production

S = 123.2 R-Sq = 97.8% R-Sq(adj) = 94.8%

Analysis of Variance

Source DF SS MS F PRegression 7 3393061 484723 31.95 0.001Residual Error 5 75852 15170Total 12 3468913The p value and the R-sq value shows that the the prediction is highlysignificant.

PROJECTION FOR TOTAL YARN PRODN IN Mn Kgs-Table-842003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

3299.881 3572.907 3842.683 4184.348 4414.693 4652.311 4897.533

8.5.9 PROJECTION FOR 100% NON COTTON YARN PRODUCTION

PROJECTION FOR NON COTTON YARN PRODN IN Mn Kgs-Table-852003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

380.9599 377.0079 371.4158 357.2399 350.9272 341.6103 329.1204

Non cotton yarn is 100% non cotton which are pure synthetics . the

growth in demand for non cotton yarn will be a driver for PSF demand. Out

of the major three types of fibre used PSF,VSF and ASF the mostly

shought after fibre for 100 % yarn are VSF and PSF. The demand for 100%

non cotton yarn is likely to grow to around 482 KTA by 2010. This will be a

major growth driver for PSF demand.

8.5.10 PROJECTION FOR PSF IMPORTS

Double Exponential Smoothing PSF IMPORTS IN KTA-Table86

Year psf imports in KTA

1990-91 10.51991-92 8.41992-93 9.11993-94 19.11994-95 44.31995-96 40.41996-97 38.61997-98 29.81998-99 17.41999-00 13.82000-01 21.32001-02 26.92002-03 25.8

Data C15

Length 14.0000

NMissing 0

Smoothing Constants

Alpha (level): 1.35754

Gamma (trend): 0.05931

Accuracy Measures

MAPE: 38.6735

MAD: 7.5071

MSD: 88.8245

PSF IMPORTS IN KTA

Actual

Predicted

Forecast

100 Actual

Predicted

Forecast

0 Smoothing ConstantsAlpha (level) : 1.358

Gamma (trend): 0.059

MAPE: 38.6735MAD: 7.5071

-100 MSD: 88.8245

1990-91 2000-01 2003-10

YEAR

Period Forecast Lower Upper

2003-04 20.7011 2.3087 39.093

2004-05 22.3801 -13.4247 58.185

2005-06 24.0590 -29.4783 77.596

2006-07 25.7380 -45.6138 97.090

2007-08 27.4169 -61.7820 116.616

2008-09 29.0959 -77.9667 136.158

2009-10 30.7749 -94.1607 155.710

PSF imports constitute of speciality fibres and some times normal

fibres which the local market is unable to supply. One other factor is the

dumping of fibre by tiwan and korea due to the depereciated won value-

which is protected by the anti dumping laws. The more the

demand for the import fibres less is the demand for domestic

production. Hence the domestic demand decreases.

8.5.11 PROJECTION FOR PSF EXPORTS

Double Exponential Smoothing PSF EXPORTS IN KTA-Table-87

Year psf exports in KTA Data C16Length 14.0000

1990-91 23.9 NMissing 01991-92 13.2 Smoothing Constants1992-93 17.31993-94 7.1 Alpha (level): 0.565582

1994-95 11.0 Gamma (trend): 0.1607441995-96 8.91996-97 8.2

Accuracy Measures

1997-98 8.0 MAPE: 42.2511998-99 16.6 MAD: 8.1371999-00 51.12000-01 29.2 MSD: 161.320

2005-06 29.32008-09 32.1

80

60

40

20

0

0

PSF EXPORTS IN KTA

Actual

Predicted

Forecast

ActualPredictedForecast

Smoothing ConstantsAlpha (level): 0.566Gamma (trend): 0.161

MAPE: 42.251MAD: 8.137MSD: 161.320

10 20

Time

Period Forecast Lower Upper

2003-04 28.0713 8.1362 48.0063

2004-05 28.8741 5.5189 52.2293

2005-06 29.6769 2.5588 56.7950

2006-07 30.4798 -0.6199 61.5794

2007-08 31.2826 -3.9432 66.5084

2008-09 32.0854 -7.3657 71.5365

2009-10 32.8882 -10.8588 76.6352

PSF exports is also a growth driver for PSF demand growth.Exports are

expected to rise to 33 KTA by 2010. With the removal of quota exports are

expected to rise more than the figures projected.

PSF/PFY/TOTAL POLYESTER/COTTON/VSF/ASF CONSUMPTION IN TONNES -Table-88

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001 2003-2004 2008-2009

PSF consumption in tonnes

120812 131342 153316 212094 254378 258978 326033 457203 523527 514250 558491 560465 648622

Polyester Filament consumption in 210766 207261 242280 301592 318997 395962 472038 612800 737339 827086 785286 865822 1115052

tonnes

TOTPSFPOY consumption in 331578 338603 395596 513686 573375 654940 798071 1070003 1260866 1341336 1343777 1426287 1593674

tonnes

COTTON CONSUMPTION 1822 1766 1895 2051 2065 2295 2566 2719 2485 2652 2721 2701 3152

in tonnes

VSFCONS intonnes

154 163 161 181 195 207 186 196 182 205 221 191 225.79

ASFCONS intonnes

47 50 54 72 99 92 109 111 105 99 104 114 119.36

8.5.13 PROJECTION FOR COTTON CONSUMPTION

Regression Analysis: COTTON CONSU versus COTTON yarn , BLENDED yarn The regression equation is COTTON CONSUMPTION in tonnes = 420 + 0.878 COTTON yarn prodn in Mn kg

+ 0.534 BLENDED yarn prodn in Mn kg

S = 39.37 R-Sq = 99.1% R-Sq(adj) = 98.9%

Analysis of Variance

Source DF SS MS F PRegression 2 1627342 813671 525.07 0.000

Residual Error 10 15496 1550Total 12 1642839The p value and the R-sq value shows that the the prediction is highlysignificant.

PROJECTION FOR COTTON CONSUMPTION-Table-90

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

2754 2968 3179 3452 3627 3808 3995

8.5.14 PROJECTION FOR PSF CONSUMPTION

Regression Analysis: PSF consumpt versus BLENDED yarn, NONCOTTON yarn The regression equation is PSF consumption in tonnes = - 149695 + 834 BLENDED yarn prodn in Mn kg

+ 699 NONCOTTON yarn prodn in Mn kg

S = 28370 R-Sq = 97.9% R-Sq(adj) = 97.5%

Analysis of Variance

Source DF SS MS F PRegression 2 3.75848E+11 1.87924E+11 233.49 0.000Residual Error 10 8048402646 804840265Total 12 3.83897E+11The p value and the R-sq value shows that the the prediction is highlysignificant.

PROJECTION FOR PSF CONSUMPTION-Table-91

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

671421 739441 810785 895231 970159 1050939 1138137

8.5.15 PROJECTION FOR VSF CONSUMPTION

Regression Analysis: VSFCONS in t versus BLENDED yarn, NONCOTTON ya

The regression equation is VSFCONS in tonnes = 136 + 0.0307 BLENDED yarn prodn in Mn kg

+ 0.216 NONCOTTON yarn prodn in Mn kg

S = 13.06 R-Sq = 70.9% R-Sq(adj) = 65.1%

Analysis of Variance

Source DF SS MS F PRegression 2 4153.8 2076.9 12.17 0.002Residual Error 10 1705.9 170.6Total 12 5859.7The p value and the R-sq value shows that the the prediction is highlysignificant.PROJECTION FOR VSF CONSUMPTION -Table-92

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

239 240 242 242 244 245 246

8.5.16 PROJECTION FOR ASF CONSUMPTION

Regression Analysis: ASFCONS in t versus BLENDED yarn, NONCOTTON ya The regression equation is ASFCONS in tonnes = 25.0 + 0.115 BLENDED yarn prodn in Mn kg

+ 0.0724 NONCOTTON yarn prodn in Mn kg

S = 12.40 R-Sq = 80.5% R-Sq(adj) = 76.5%

Analysis of Variance

Source DF SS MS F PRegression 2 6334.3 3167.1 20.58 0.000Residual Error 10 1538.8 153.9Total 12 7873.1The p value and the R-sq value shows that the the prediction is highlysignificant.

PROJECTION FOR ASF CONSUMPTION -table93

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

129 139 149 161 171 182 195

8.5.17 PSF SUPPLY DEMAND ANALYSIS

PSF DEMAND SUPPLY ANALYSIS-Table-94

PSFFYEAR consumption in

tonnesPSF PSF

consumption in Imports inKTA KTA

PSF PSFExports in PRODN IN DEFICIT

KTA KTA

RILPRODN

RILMARKET SHARE

1990-91 120812 121 10.5 23.9 134 65 54%

1991-92 131342 131 8.4 13.2 136 65 49%

1992-93 153316 153 9.1 17.3 162 65 42%

1993-94 212094 212 19.1 7.1 200 65 31%

1994-95 254378 254 44.3 11.0 221 65 25%

1995-96 258978 259 40.4 8.9 227 94 36%1996-97 326033 326 38.6 8.2 296 277 85%

1997-98 457203 457 29.8 8.0 439 277 61%

1998-99 523527 524 17.4 16.6 523 277 53%

1999-00 514250 514 13.8 51.1 551 312 61%

2000-01 558491 558 21.3 29.2 566 341 61%

2001-02 560465 560 26.9 17.9 551 399 71%

2002-03 578622 579 25.8 29.3 582 429 74%2003-04 671421 671 20.7 28.1 608 (70.8) 453 67%

2004-05 739441 739 22.4 28.9 608 (137.9) 453 61%

2005-06 810785 811 24.1 29.7 608 (208.4) 453 56%2006-07 895231 895 25.7 30.5 608 (292.0) 453 51%

2007-08 970159 970 27.4 31.3 608 (366.0) 453 47%2008-09 1050939 1051 29.1 32.1 608 (445.9) 453 43%

2009-10 1138137 1138 30.8 32.9 608 (532.3) 453 40%

SUPPLY/DEMAND-PSF(KTA)

1400

1200

PSF consumption in KTA

PSF PRODN IN KTADEFICITPoly. (PSF consumption in KTA)

y = 1.1154x 2 + 28.998x + 81.744

1000R2 = 0.9859

800

600

400

200

0

-200(70.8)

(137.9)

(208.4)

-400 (292.0)(366.0)

(445.9)-600 (532.3)

-800

YEAR

8.5.18 PSF DEMAND SUPPLY ANALYSIS AND RIL MARKETSHARE

PSF consumption in KTA

PSF DEMAND/SUPPLY & RIL SHARE PSF PRODN IN KTA

RIL MARKET SHARE

RIL PRODN 1200 90%

85%

80%

1000 74%71% 70%

67%

800 61% 61% 61% 61% 60%

54% 53%56%

49% 51% 50%600 47%

42% 43%4040%

36%

400 31% 30%25%

20%

200

10%

0 0%

YEAR

9.1 CONCLUSION The world textile industry will be facing the greatest challenge in its

history from the last release of quota trade on 1st Jan 2005 when the

remaining 49% of quotas will be eliminated. An initial foretaste has

been observed in the previous two years after China became a WTO

member. The country managed to drastically increase its clothing

exports by 40% to more than $50 billion, at the same time the nation

is a major importer of textiles, mainly fiber intermediates and fibers,

to fuel the local garment industry. This makes clear the country’s need

to further expand domestic upstream capacities in spinning and fiber

intermediates. This ongoing development in China and to a minor

extent in other Asian countries highlights the enormous challenge to

fiber companies located in the western hemisphere. Strategies for

survival in higher cost economies are becoming inevitable to position

its comparative edge. From the variety of measures, the focus of

present industry is on technical innovations to gain sustainability.

The development over the last decade has shown that 82% of the

additional volume consumed has come from synthetics. While

cellulosics’ increase averaged at 0.6% annually, cotton showed an

average annual growth of 1.7% and synthetics jumped up by 5.9%. In

other words, 14 out of 17 million tonnes of additional demand was met

by synthetic fibers over the period 1993 to 2003. This trend is

commonly expected to continue.

Nevertheless, in apparel end-uses, accounting for more than half the

world’s fiber demand, natural fiber is preferred for reasons of comfort.

Relative pricing disadvantages as well as natural restrictions argue

against a cotton-dominated textile industry.

Technical innovations to imitate nature and to make fibers more

natural will be the key to success. This would also address growing

public concerns about the environment by making fibers biodegradable

and manufacturing them from renewable resources.

Representative for developments may be Lenzing’s Lyocell and Cargill

Dow’s PLA fiber.

Lyocell, the 100% cellulosic fiber, is based on a particularly eco-friendly, closed-loop production process. In addition to the natural fibers properties, Lyocell offers high strength, both in wet and dry state. Due to its permanent crimp, fabrics contain excellent wearing comfort and color brillianceThe current season’s global cotton production is expected to be higher at about 20.05 million tonnes, representing a 5% increase over 2002. Output in most major-producing countries is estimated higher with the exception of China. Two thirds of this volume is being consumed in five countries - China (6.6 million tonnes), India (2.9), Pakistan (2.0),U.S. (1.3) and Turkey (1.3). Wool and lamb/mutton are the principle products in the sheep

industry. Consumption and prices of wool have decreased so low since

the beginning of the nineties that any valueadded sometimes exceeds

the value of manufacturing the wool. The dwindling demand for wool

can be ascribed to consumer acceptance of synthetic manmade fibers.

Changes in consumer behavior towards lighter weight, casual clothing

have additionally supported this substitution.World wool production

has continued its long-established downward trend, the volume

declinedby 2.1% to 1.24 million tonnes. Half the wool output comes

from Australia and New Zealand, directing nearly all the output for

shipments abroad, mainly China, the largest wool processing country.

World population of 6.34 billion corresponds to an average per capita

consumption of 9.9 kg.Manmade fibers accounted for 35.10 million

tonnes (+4.9%), comprising a 55.8% market share. Cotton, wool and silk

declined by 0.6% to 22.61 million tonnes.

On a world basis, demand for fibers from the first two groups has

increased by 2.7%. As in the recent years, the manmade fibers

performance exceeded that of cotton in terms of the growth rate..

2

Since the beginning of the 90’s manmade fibers have been the most

important fiber type in terms of volume.Manmade fibers managed to

perform with an average annual growth rate of 4.7% whilenatural

fibers accounted for a mere 0.4% annual increase in average.With

some exceptions in the early- and mid-eighties, filament yarns have

developed stronger than staple fibers. Over the past fifteen years,

filament yarns - most commonly further processed via texturing or

twisting - have enjoyed an average annual growth of 6.0%. Staple

fibers have increased by 1.4%, of which cotton and wool by 0.5% and

manmade staple fibers by 2.8%. Staple fibers are the raw material for

spinning of staple fiber yarns (synonym: spun yarn) and for

manufacturing of drylaid nonwovens.The reasons for this unbalanced

development are manifold. Filaments have favorable manufacturing

costs and do not depend on natural restrictions in terms of the raw

material availability.Technological progress in spinning equipment has

led to outstanding yarn properties enabling filaments to branch out

into new markets that have been traditionally occupied by spun yarn

applications. This trend has been supported and enforced by consumer

acceptance.

The following consumption pattern exemplified for the Indian market

proves this trend. In

addition to that, it will show the commanding position of polyester.

Over the previous decade, local demand of yarns has increased on an

average annual basis by 4.8% to about 3 million tonnes in 2003/04.

During this period the ratios of the yarn types have drastically changed

and polyester continued its triumphal procession.

The share of polyester in filament yarns has gone up from 74% to

91% and in non-cotton spun yarn blends from 58% to 74%. The

growing filament demand in India resulted from a shift in consumer

preference towards synthetics particularly in rural areas, the

consumption rose from 49% to 66% over this period. Cotton demand

in the same areas dropped from 51% to 34%. Two of the fastest

growing end-uses for filament in India have been stimulating this

growth.

Firstly, sarees - traditional Indian dress for ladies - before the

widespread of synthetics were made for the high-end of the market

out of silk and for the low-end out of cotton. The introduction of high

taxes on polyester by the Indian government was to protect the own

cotton industry. As a result, polyester became an expensive fiber with

high in demand among rich people only. The growing demand for

polyester sarees substituted more and more silk in the high-end

market. After tax reductions on polyester, a booming demand for

polyester sarees materialized which still had the image of an exclusive

piece of garment but became affordable to a larger share of Indian

ladies.

Secondly, there has been a growing polyester demand for men’s wear

trousers and suitings.Changing purchasing patterns have been

influenced by its wearing comfort, easy care and advantages in price.

Polyester

Previous year’s polyester output has increased by 7.2% to 22.26

million tonnes. Above average growth has been observed in filament

markets, rising by 7.6% to 12.87 million tonnes. Staple fibers went up

by 6.6% to 9.39 million tonnes. Double-digit growth rates occurred in

China, Pakistan and the Kingdom of Saudi Arabia on a small scale

level. The small group of countries that have also managed to increase

the output volume is mainly located in Asia. This resulted in a further

shifting of manufacturing to the Asian region, now accounting for a

83% share. Meanwhile, Europe and the Americas have further lost

ground, especially in textile filament and staple fibers.

Polyamide

Negative volume changes in Europe and the Americas together with

modest increases in Asia characterized the world polyamide fibers

industry, resulting in a stagnating volume at 3.93 million tonnes.

While staple fibers continued their long-term downward trend, filament

yarn applications have shown a mixed performance. Yarns for

industrial end-uses were the only segment with increasing demand

over 2002.

Polypropylene

The production of polypropylene fibers increased by 0.7% to 2.99

million tonnes. Textile yarns are mainly the basic raw material for

niche markets. Such yarn is much required in sport and functional

clothes. In the meantime, an increasing consumption for stocking and

socks wins recognition. Additionally to carpets, polypropylene filament

yarns became established in several home textile and industrial

applications helping to disengage from the poor image of former times.

The development in price proves this acceptance is on the rise.Locally

restricted, polypropylene yarns are ranked before commodity polyester

filament applications in termes of prices. Polyester, suffering from

huge overcapacity, has partly replaced polypropylene in weaving end-

uses. Formerly known as a 100% polypropylene fabric tends to be

containing a polypropylene and a polyester layer.

Textile Yarn

The textile filament yarn segment serves a broad range of applications

from apparel to home textiles. In 2003, output increased by 6.4% to

14.6 million tonnes. Some 83% of the textile end-uses come from

polyester, that managed to further grow by 7.6% to 12.0 million

tonnes. China,India, South Korea,and Taiwan account for 77%of all

manufactured polyester textile filaments. .

Micro filaments are on their way to becoming commodities. Large new

capacity of some ten thousands of tonnes of sea island yarns in PR

China has led to a drastic drop in prices by about 50% in the Asian

market.

Polyamide textile filaments stagnated at 1.6 million tonnes with a

decreasing consumption for fine yarns . This decline was more than

offset by favorable conditions for coarser yarns and micro filaments for

underwear and sports clothing.

Cellulosic textile filament yarns discontinued their downward trend and

increased by 3.9% topping 0.4 million tonnes.

Polypropylene filaments, predominantly used in carpets, showed a

further tendency to enter new market niches for textile applications.

The demand for upholstery, sport and functional textiles show a

healthy growth.

According to the spinning process, textile yarns are split into in POY

and FDY. Partially oriented yarns, accounting for about 75% of the

world market, require further processing before manufacturing fabrics.

With respect to the volume, texturing is the most popular process to

finally draw the yarns, giving them a comfortable feeling called “textile

touch”.

Air-jet textured yarns take in a 8% market share in terms of number of

positions

Industrial Yarn

The market of high-tenacity yarns essentially comprises polyester,

polyamide, polypropylene and viscose yarns, predominantly used in

the automotive industry as reinforcing or composite materials.

Polyamide leads the world market with a 44% share, followed by

polyester comprising a 38%Share.Polypropylene with major usage in

ropes, nets, twines and belts also increased.

Spun Yarn

Staple fibers are the raw material for the spun yarn and nonwovens

production. The global amount of staple fibers being further processed

slightly increased by 1.4% to 38.83 million tonnes with natural fibers

taking in a 58% share. With the exception of cellulosics and polyester,

production of all the remaining types declined in a range from 0.2% to

1.9%. The global supply of staple fibers can be split into the following

three subsequent processing technologies:

Short Staple

The world short staple spun yarn production increased by 1.3% to

30.8 million tonnes. The three spinning technologies - ring, rotor and

air jet spining - cover with their different focus on applications the

entire range concerning fineness and input material.

China, the unquestioned leader in terms of production and installed

equipment in this sector, rose production by 16% to 9.3 million

tonnes. This is three times the output of second ranked India.

The output of spun yarn in India remained almost at the level of the

previous years at 3 million tonnes. The majority of 69% was cotton

yarn, followed by 20% blends and 11% non-cotton yarn. One bright

spot in last year’s performance was the 17% rise in the hosiery sector.

The Indian textile industry witnessed a 5% decline in spinning and

composite mills at 1,784, leading to a decline in installed spindles by

roughly 6% to 33.88 million. The number of rotors remained at nearly

379,000 despite below-average shipments of some 3,500 new

positions. The cyclic investments in rotor spinning capacity has

continued. India is considered by many U.S. firms the primary

alternative to China. Over the long term, competitiveness may

diminish as strong economic growth leads to greater domestic demand

for textiles and apparel, and for the labor and capital to make these

goods. Apparel will continue to decline, like sheeting and bath

products. Technical products may remain strong, but in relative

volume, they are nothing compared to cotton and polyester/cotton

short staple.The major producing nations like China, India, Pakistan,

United States, Brazil and Turkey produced more than 19 million tonnes

in 2003. This comes to a 63% share of the global industry.

Long Staple

While the long-staple spinning industry has traditionally focused on the

processing of wool, today it is increasingly dominated by manmade

fibers.Long staple fiber production marginally decreased by 2.0% to

3.9 million tonnes, of which wool comprised approximately 1.27 million

tonnes (clean basis).

World yarn production

The global amount of filament and spun yarns accounted for 53.5

million tonnes representing a 2.4% increase over 2002. Although short

staple yarn still dominates the world market with a 57.5% share,

filament yarns have shown a more dynamic development over the

period with an average annual growth rate of 5.1% comprising a

33.4% share compared with 20.7% in 1980. Short staple yarns just

account for an average annual growth rate of 1.9% over this period.

Oveview

The development at consumer side has been steady-going due to

increasing world population and economic improvements as well as the

desire for fashionable and diversified clothing.Although this appears to

be a rather healthy growth, the increasing imbalance on the supplyside

may cause some concerns. The dominating factor driving this

imbalance has been regional advantages of low labor costs. Formerly

geographically advantaged industries adjacent to the big consuming

regions were in a favorable position. When quota-free textile trade will

come into operation in 2005, countries such as PR China, India,

Pakistan, Turkey, Indonesia, Vietnam and Bangladesh will gain higher-

than-average benefit from this opening of the industrialized markets.

What is it, that those countries have in common? They have all

embarked on the strategy to expand their textile and garment industry

which is regarded as crucial to economic development. Outstanding

success, over recent years, in the pursuit of this policy has led to a

widening gap between production and final consumption on a global

scale. Furthermore the dependency on just a few markets, which

account for a large proportion of global textile demand, has sharply

increased. Following the guiding theme “big is beautiful”, the entire

textile chain has been subject to fundamental changes. Quite a

considerable amount of garment production is being sourced by a few

multi-billion-dollar retail companies and huge foreign direct

investments from industrialized to emerging countries have further

strengthened this shifting of capacity. The retail sector is already in a

process of restructuring and more consolidation will mean even further

increases in the influence of the retailer in the re-allocation of the

textile value chain. Will this sourcing in low cost countries prove

sustainable? Yes, but it will also offer other countries a fair opportunity

to gain attractiveness. Growth in today’s booming markets will not be

endless, but constrained by shortages in energy and raw materials.

Economic growth will result in greater domestic demand for textiles

and apparel as well as higher labor costs in the long run. Secondly,

retailers already strongly interfering into the manufacturing and

distribution flow, will avoid a single-region dependency, and search for

alternatives. However, some concerns may arise due to efforts to

impose regulations in terms of trade protectionism by means of yarn

or fabric forward rules and tariffs. These measures cannot help the

industry in Western Europe or the United States to revive. Major parts

of the big volume apparel market have already left and they will not

come back. Instead, the industry’s only chance will be in concentrating

on superior quality and innovative products. Naturally, every single

innovation must enjoy an absolutely reliable and effective protection

against imitations. The particular focus in the western hemisphere is

linked to the labor market. The combination of automation and loss of

market share to foreign competitors caused the loss of several million

manufacturing jobs over the previous years. Stimulating domestic

demand through tax cuts and record low interest rates has just been

creating jobs in China or its neighboring countries. However, anything

else than commonly respected rules on how to practice world trade

and global manufacturing will even worsen this situation. An

unrestricted evolvement of the market forces will eventually increase

economic welfare the most. From that point of view, a liberated textile

trade may disclose unexpected opportunities to the world textile

industry. Although there is still a way to go until free trade is

established, as some import tariffs, non-tariff barriers and subsidies

will remain beyond 2005, it may be a promising step after phasing-out of

the quotas from January 2005 onwards. Today’s dynamics force

everybody to be part of the appropriate chain for tomorrow’s success in

the global gamble. It is becoming even more crucial to have the right

partners, full market knowledge and the technical capability to master

the challenges ahead.

The demand for PSF is increasing .Players in China,Taiwan,Indonesia

are coming up with major expansions.Inhouse domestic producer

Indorama is also expanding with around 160000 TPA. Demand for

short staple is increasing. The current market share of RIL at 67% is

going to reduce to 40% by 2010 with the existing capacities. With

increasing price of PTA and MEG the margins are getting squeezed. So

capacity and speciality are going to be the major strategy for existing

players in the field.Micro fibres have started becoming a

commodity.Demand by 2010 is likely to increase to about 1138 KTA.

With the lifting of quota from next year the world will become a

common playground for everybody. It is high time that RIL too should

expand its capacity to maintain market leadership.

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Websites

1. Www.Ril.Com2. Www.Indorama.Com3. Www.Hillsine.Net4. Www.Fibrejournal.Com5. Www.Textile.Saurer.Com6. Www.Textileministry.Com7. Www.Infoline.Com8. Www.Wto.Com9. Www.Itma.Com