TN’s Pallipalayam hit by trade war as China dumps viscose spun yarn

Pallipalayam, a small town near Erode in Tamil Nadu, finds itself in the middle of the US-China trade war. The town is a hub of production of viscose spun yarn (VSY) that is used in knitted and woven fabrics. This textile cluster has 60+ spinning mills manufacturing only viscose spun yarn. The textile manufacturers in the town say that the Chinese have begun to dump VSY and this, in turn, impacted yarn production. Sources told. that the dumping is happening in major ports, including Kandla and Mundra. Viscose staple fibre (VSF) is a man-made fibre that is spun into VSY. Around 80 per cent of VSF produced in India is used by mills in Pallipalayam to make the threads, a source said. Across India, about 2,200 tonnes of VSF are consumed by mills in a day and nearly 2,000 tonnes get consumed in Pallipalayam alone, he added. “In India, our village is the specialist in producing VSY with a market share of nearly 85 per cent,” he said. Ramesh Natrajan, Executive Director of AGT Mills in Pallipalayam and president of The Indian Manmade Yarn Manufacturers Association, said that the cost to manufacture is ₹205 per kg but they sell it at around ₹198 per kg to weavers and knitters in Erode, Palladam, Tiruppur, Delhi and Punjab. “However, the Chinese are dumping at ₹185 per kg, that too of poor quality, after the trade war started with the US. Since China is unable to sell VSY in other markets, it is dumping in India,” he said. Natarajan urged the Centre to impose anti-dumping duty on VSY from China. K Venkatachalam, Chief Advisor, Tamil Nadu Spinning Mills Association, last week sought the intervention of the Textile and Commerce Ministries to prevent the flooding of cheaper VSY imports from China.

Prabhu Dhamodharan, Convenor of the Coimbatore-based Indian Texpreneurs Federation (ITF) said, historically, when facing export hurdles with the US or EU, China has redirected excess textile goods to Asian markets. Even before the latest US tariffs, China’s textile and apparel exports fell 4.5 per cent in January–February 2025, he added. In recent times, dumping of knitted fabrics and polyester yarn/fabrics was curbed resulting in a 43 per cent y-o-y drop in knitted fabric imports this January. Now, the focus shifts to dumping of viscose yarn a key segment with hundreds of spinning mills already under stress. Unchecked imports could severely impact this sector. The Directorate General of Trade Remedies in the Commerce Ministry recommended an anti-dumping duty on viscose spun yarn from China of $0.41 to $0.80/kg in December 2020. However, sources said this was not imposed. Crisil, in 2023, said that the Indian VSY market is expected to reach over $2.5 billion this fiscal. But, sources said the current market size should be over $3 billion.