Indian denim makers shrug off indigo price rise
Indian denim manufacturers are coping better than alarmist reports would suggest with a 25% rise in the price of synthetic indigo dye imported from China. They have warned, however, that they may try to pass on the cost increase in the next buying season.
"Within the last few months, the price of [synthetic] indigo dye has gone up from US$7.3 to US$9.1 per kilogram," says Srinivasan Aruchamy, managing director of Sree Balaji Denim, an indigo yarn trading company in Coimbatore, Tamil Nadu, India.
Some analysts blame the rise on depreciation of the Indian Rupee. Dr Prabal Ranjan Roy, an independent garment industry consultant, disagrees. He sees the main reason as increasing demand from denim manufacturers in India, Pakistan and Bangladesh.
"Denim is a very hot product," he says. "It's the only product in the entire textile gamut which is doing very well in last two years."
India alone produces 850m metres of denim annually, 120m metres of it from Arvind Mills, the largest denim manufacturer.
It is among many absorbing higher indigo prices. "In the short term, we cannot increase the product price as we have already committed for the present production," Aamir Akhtar, CEO of Arvind Mills told just-style.
He adds that the company will try to pass on cost increases when it starts negotiations for the next buying season, though he is not very hopeful of being able to do so. "As the markets are very challenging, we will have to speak to our customers and see if it is possible," he says.
It is a tough ask: in addition to marketing Flying Machine, its own brand, Ahmedabad-based Arvind Mills supplies denim fabric to global brands such as Levi's, Lee, and Wrangler who compete in price-sensitive markets, some of them in recession.
Reliant on Chinese dye
Indigo has always been important to denim making. It is used mostly in powder form to dye the yarn. Indian garment companies have long depended on imported Chinese dye.
"When India started denim production in the 1980s there were very few indigo-based garment products in the market so there was no demand for synthetic dye," Roy explains. So synthetic dye was imported and China has become sole supplier to the Indian industry while indigenous dye makers failed or chose not to respond.
Natural indigo has always been an alternative. It has been cultivated in the Indian subcontinent since the beginning of British occupation. The crop survived despite a nineteenth century revolt by indigo farmers. Legend has it that, in 1860, a British officer commented: "Not a chest of indigo reached England without being stained with human blood."
But costlier natural indigo is now mostly used for hair dyes or in high quality exclusive denim products.
"The price of natural dyes is ten times higher than the synthetic substitute and very few garment manufacturers use them," says Suresh Chellappan, CEO of NCC Agro Industries, a Villupuram, Tamil Nadu company cultivating indigo and manufacturing natural dye.
NCC Agro also exports to Japan, South Korea and Taiwan, where its dye is used in denim production, says Chellapan. He puts the current international price for superior quality indigo extract, with 40-45% of Indigo tint content, at US$55 per kilogram.
Chellappan says the cost of natural dye has also risen recently due to limited cultivation of the crop this year. It is a seasonal product, cropped in only three months each year.
Despite price rises for both synthetic and natural indigos, a dependence on imports, and notwithstanding price resistance among garment buyers, the denim industry needs not panic, as there is no shortage of dye imports from China, according to Aruchamy.
In the final analysis, as a cost component, indigo dye's share in the total cost of denim manufacturing is relatively small, says Akhtar, without volunteering a precise breakdown.
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