Fall in cotton, yarn prices create new crisis in RMG sector

Al Amin :
Decline in cotton and yarn prices has created a new crisis for the entrepreneurs of the country’s apparel industry as the buyers are pressurizing them for reducing prices of clothes, the sector insiders said.
The cotton price has declined by 50 per cent compared to that in May this year. As a result, the local spinning mill owners have huge stockpiles of cotton and yarn. After buying cotton at higher prices in the past, now they are also incurring losses, the entrepreneurs said.
Besides, the ongoing gas and electricity crisis have caused
the production cost to rise. On contrary, the export orders have decreased sharply, they said.
Under the situation, it has become a big challenge for them to survive at the moment, they added.
The entrepreneurs in the apparel and textile sectors have sought policy support from the government to cope with the adverse situation.
According to ICE Futures US, cotton price is now down by 50 per cent when compared that in May this year.
Md Shahidullah Azim, Vice-President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The New Nation, “As the demand for apparel has fallen, the demand for its raw materials has also down. As a result, the prices of yarn and cotton have come down.”
Cotton prices have now fallen to the lowest levels in the last six months, he said.
Under the circumstance, we expect a supportive role from the government offices to survive in these difficult times, he added.
The apparel export registered negative growth in September and is expected negative growth in October too.
In the first 20 days of this month, the readymade garment sector earned $1.77 billion, down by 19 per cent from $2.17 billion in the same period last year, according to the BGMEA.
The apparel exports posted a 7.5 per cent negative growth in September this year compared to the same month last year, after a prolonged spell of growth for 13 months.
The decline in the last two months is attributed to a reduced demand because of record inflation and economic slowdown in major export destinations.
The industry owners said that production in most factories had already fallen below 30 per cent compared to three to four months ago.
Fazle Shamim Ehsan, Vice-President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, “Most of the buyers are now pressurizing us for reducing apparel price as cotton and yarn prices declined significantly.”
Besides, we are now incurring losses as we booked yarns at higher price in the past, he said.
Western retailers were sitting on huge stockpiles as demand plummeted and the export orders may start increasing once the inventory becomes slim, the sector insiders said.
Even then, it was most unlikely that Bangladesh’s exports would post positive growth in the current fiscal year 2022-23.
The BGMEA has started negotiations with the government to bring down the existing 1 per cent source tax on garment exports to 0.5 per cent as before.
Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh, said some assistance may be required on a case-to-case basis like in the Covid period as export situation is worsening gradually.