Amid the increase in the use of synthetic yarn globally, spinning mill owners in the country are opting for investing more in this segment to decrease their dependency on cotton yarn to stay competitive in the global market.
As part of the move, leading spinning mills, including Envoy, Matin Spinning of DBL Group, Maksons, Square, and Shasha Denim, are investing in product diversification.
As a backward linkage sector for the textile and export-oriented readymade garment industry, spinning mills have been facing an uneven competition with imported fabrics and yarns for the last four to five years.
Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), told The Business Standard that the demand for cotton yarn had dropped by 35% on the international market recently.
"Most of the buyers have been preferring synthetic and mixed yarn-based fabrics for a couple of years. That is why we are investing more to produce this type of yarn," he said.
The BTMA said local spinning mills can meet about 80% of the demand for export-oriented knit yarn and 40% of that for woven yarn while synthetic and mixed yarn are mostly imported from China.
Matin Spinning Mills, a sister concern of DBL Group, on Saturday evening decided to invest Tk186 crore to set up a special yarn unit to produce synthetic yarn.
MA Jabbar, managing director of DBL Group, said, "We are investing to increase synthetic yarn production in line with the demand in the global market. We also have plans to invest more in product diversification."
As per the Matin Spinning disclosure posted on the Dhaka Stock Exchange website, the special yarn unit will boost the company's daily production capacity by 10 tonnes and the estimated turnover will grow by Tk100 crore per year.
Like DBL Group, Envoy Group will invest Tk125 crore in setting up a synthetic yarn unit. The new unit will produce 12 tonnes of yarn per day and will come into operation by October.
Kutubuddin Ahmed, chairman of the group, said the demand for synthetic yarn is growing worldwide, adding that its production cost is low and it is quite durable.
"On the other hand, raw cotton prices have been unstable for the last few years in the world market and that is why cotton yarn production cost is increasing," he explained.
"So, we could not maintain profit margins by using cotton yarn."
Maksons Group, one of the top 10 spinning mills in the country, has announced to invest around Tk1,000 crore in three new spinning units in Mirsarai Economic Zone.
Metro Spinning Limited, a concern of the group, will invest Tk340 crore in a unit while Maksons Spinning Mills will pour Tk254 crore and Tk348 crore into two other units, according to company insiders.
Khokon, also the managing director of Maksons Group, said, "We are going for a big investment to manufacture high-value diversified products so that we can stay competitive in the market."
This is likely to be the biggest investment plan by a Bangladeshi textile group during the ongoing pandemic.
Square Textiles is to invest Tk30 crore while Mozaffar Hossain Spinning Mills has already invested Tk250 crore to boost production.
Shasha Denim has signed a deal with the Bangladesh Export Processing Zone Authority to lease eight plots in the Dhaka Export Processing Zone area for future business expansion.
BTMA President Mohammad Ali Khokon said the utility price hike had been squeezing spinning mills' bottom line since 2018, putting the capital-intensive sector in trouble even before the pandemic struck.
Khokon further said business is not going well at the moment due to the pandemic but the downturn would not last forever.
"Moreover, there have been many changes in yarn types. So, we have to prepare now to retain big buyers in the future."
The pandemic came as a fresh blow to the sector, hampering production, increasing unsold stocks, and disrupting cash flow.
But many textile mills have already cleared their stocks and fresh orders are coming from apparel makers.