Falling garment export orders bring spinners down to earth

Just six months ago spinners were flying high with orders from apparel exporters. To handle the demand many entrepreneurs set up new plants and expanded their existing factories.

According to Bangladesh Textile Mills Association (BTMA), over two dozen mills were set up only in 2021 to meet the growing demand for yarn from garment exporters. The millers could not even dream that the situation would reverse in just six months and their business will be brought down to the earth.

“Our mills are running on under capacity as orders have come down significantly in the last couple of months,” said Fazlul Hoque, vice president of BTMA and managing director of Israq Textiles.

Hoque was one those entrepreneurs who invested around $20 million to establish a new factory to produce 50 tonnes of yarn a day. His hope is now dashed.

“As readymade garment exporters are not getting orders, so we are. The Russia-Ukraine war has created many problems for us,” he said.

Monsoor Ahmed, additional director and CEO (in-charge) of BTMA, said many spinning mills are running on only 30 percent capacity as they are sitting on a stockpile of yarn.

“Demand has come down significantly and the prices of yarn as well. Millers are selling yarn even at their costing prices,” Ahmed said.

Currently, Bangladesh has around 500 yarn manufacturing mills and they provide 90 percent of the demand for the knitwear makers and around 50 percent for woven exporters. Around 80 percent of the yarn produced by spinners is cotton yarn, which also has become a new challenge because of shipment difficulty and high freight costs.

Muhammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), which is the main consumer of yarn, admitted that they are in severe shortage of export orders.

“At this moment I have no enquiry of export. Buyers have taken a wait-and-see position,” said Hatem.

According to him, there are two major reasons for which export orders came down significantly. These are – recession fears in the western countries and falling cotton prices. He also said some buyers are creating pressure to cut prices they agreed earlier.

“Projection is not good at this moment as uncertainty prevails across the world,” said MA Jabbar, managing director of DBL Group that is a major garment exporter and yarn producer as well.

He predicts that this thin demand for apparel exports may continue in the next several months.

Bangladesh’s merchandise exports rose 34.38 percent to $52.08 billion in FY22 riding on the readymade garments that accounted for $42.61 billion of exports.