Cotton price hike strains RMG makers
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FRIDAY, FEBRUARY 03, 2023
Cotton price hike strains RMG makers

RMG

Reyad Hossain
04 July, 2021, 10:50 pm
Last modified: 05 July, 2021, 09:26 am

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Cotton price hike strains RMG makers

The price of cotton was 58-60 cents per pound before the pandemic last year which is now $1.2 per pound

Reyad Hossain
04 July, 2021, 10:50 pm
Last modified: 05 July, 2021, 09:26 am

Rising cotton prices have come as a fresh blow to the apparel industry, putting stress on profitability of clothing business both in local and export markets.

Fabric has become costlier as cotton prices almost doubled in a year, but local dressmakers say they cannot revise their prices upward accordingly, keeping in view the low demand in the market and the decline in people's purchasing capacity in these pandemic days.

On the export front too, higher fabric price induced by global cotton price hike has come on top of surging freight charges and shipment delays, forcing exporters to compromise prices to stay afloat.

According to industry insiders, cotton production is predicted to be on the decline next year. The price of the raw material of yarn is less likely to come down in the future. Rather, it may increase further.

Sumon Das buys cloth from Dhaka's Islampur and Keraniganj and makes denim pants in his small factory at Shah Ali College Market in Mirpur 1. He sells the pants to wholesale buyers.

"The same cloth that I used to buy at Tk110-120 per yard a year ago is now sold at Tk140-160. Prices have risen sharply since last September. But I could not increase the price of my pants as there is a lack of demand in the market," said Sumon.

"I am selling a pair of pants at Tk310-320 – as before," he said.

"There is not enough demand in the market because the pandemic has affected people's earnings. Those who buy products from me and sell in the retail market do not have enough money. There have been no sales in three consecutive Eids. I do not know how I will pay my workers, the shop rent, or even my house rent," said Sumon.

Traders in Islampur and Keraniganj, the country's largest wholesale market for readymade garments and fabrics, also expressed their despair due to the hike in cotton prices.

Traders said they could not raise prices of their products due to low demand. As a result, they are bearing the pressure of the extra cotton price.

Big clothing retailer brands are also facing the same problems in their business.

Shahin Ahmed, proprietor of the local fashion brand Anjans and president of the Bangladesh Fashion Designers Association, told The Business Standard, "Prices of some fabrics have risen by 10% to 15% in the past few months. It will increase more. But I cannot increase the prices of our items. As a result, profits will be diminished and some people will have to even count losses."

There are 5,000 companies across the country in this supply chain, including small and big fashion houses and designers. "The annual turnover of these companies is Tk8,000-10,000 crore. But, their sales have dropped by more than half since the pandemic began," said Shahin.

Ashraful Alam, chief operating officer of Aarong, said, "We estimate commodity prices by calculating the rising cost of raw materials. However, we are worried because of the latest lockdown in the country which may damage the Eid business."

According to textile mill owners and industry insiders, the price of cotton has doubled in the last one year. As a result, the prices of yarn and cloth have gone up.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), told The Business Standard that the local textile mill owners could not raise the prices of yarns at the rate at which the prices of cotton had gone up.

"The price of cotton was 58-60 cents per pound before the pandemic last year, and it is now $1.2. That means the price of cotton has almost doubled. However, the price of yarn was $2.60 to $2.70 per pound during the pandemic last year and now it has increased to $4.10. You will see that the price of yarn has not increased 100%. It could then be $5," he said.

He also said the demand for cotton will naturally increase due to the demand for cotton garments amid the pandemic situation. But the production of cotton is not increasing in line with this. The harvest of cotton was hampered last year due to the pandemic. This year's forecast also predicted a lowered cotton production.

Khorshed Alam, chairman of Little Star Spinning Mills Limited and former director of BTMA, said, "Eight months ago the price of 50-count cotton was 65 cents per pound and now it is $1.2. The price of 80-count cotton has increased from $1.08 to $1.72."

According to BTMA, the country's annual garment and textile market is worth $8 billion (Tk68,000 crore). The amount of investment in the textile sector is about Tk50,000 crore. There are more than 1,500 yarn, fabric, dyeing, printing and finishing factories listed with the organisation. However, there are many factories in the country which are not members of BTMA.

Entrepreneurs in the textile sector said container charges, carrier costs, increased port charges, yarn quality and machinery also impact cotton prices. The gap between demand and supply is another factor.

They said the demand for local yarn has increased as imports from India, the country's main source of cotton and yarn, have declined.

President of Bangladesh Internal Garment Manufacturers Association Md Alauddin Malik said, "The owners of these garment factories are not able to increase the prices even though the prices of raw materials have gone up. The Eid sale is also uncertain due to the lockdown."

"There are around 6,000 members in our organisation. These factories mainly make garments for the local market. "Sales have dropped by about 70% since the country's Covid-19 outbreak began last year," he added.

Impact on garment exports

Despite the recent increase in export orders, the rising price of yarn has led to a sharp rise in the price of fabrics. Industry insiders say this has put additional pressure on them.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) does not have accurate figures on how much the price of fabric has gone up in the last one year. However, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said fabric prices have risen more than 40% in one year.

Mohammad Hatem, 1st vice president of BKMEA, told The Business Standard, "The price of fabric used in a T-shirt was $4.65 per kg a year ago, which is now $6.65 per kg."

Entrepreneurs in this sector say the price hike in cotton along with the rise in shipping costs have put pressure on the exporters.

Mohammad Hatem said, "For example, if a T-shirt is exported for $1.5, it is expected to be priced at $1.8 due to the rising raw material prices. But the buyer is paying $1.6. On the other hand, the cost of sending a 20-foot container to Chattogram port was Tk6,000 to Tk10,000 three months ago. Now, the cost has increased to Tk22,000 to Tk24,000.

"This will increase our liquidity crisis," he added.

Economy / Top News

Cotton / price hike / RMG

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