Cotton, yarn imports plunge

Bangladesh's cotton and yarn imports nosedived in the first nine months of 2023 as falling demand in the global and local markets, erratic gas supply and the US dollar crisis weighed on textile milers.

The country's import of cotton to make yarn dipped 28 percent year-on-year to 9.87 lakh tonnes in January-September, according to figures from the Bangladesh Textile Mills Association (BTMA).

Businesses imported 13.66 lakh tonnes of cotton during the identical period a year ago.

Likewise, yarn import fell 26 percent to 6.29 lakh tonnes in the nine months to September from 8.51 lakh tonnes a year prior.

The decline in the import of cotton and yarn by textile mills comes at a time when export receipts by the readymade garment industry, which generates more than 80 percent of the country's earnings from the external sector, have slowed.

In October, garment shipments slumped 14 percent, year-on-year. Overall, earnings from the apparel sector grew nearly 6 percent to $38.7 billion in January-October. It was $36.6 billion during the same period in 2022, according to the Bangladesh Garment Manufacturers and Exporters Association.

A Matin Chowdhury, managing director of New Asia Group, a vertically integrated apparel manufacturing entity, said the demand has dropped 25 to 30 percent as a result of slowing global demand.

"There has also been a lot of disruption in production due to erratic gas supply. Local demand has declined too for the current economic condition."

Chowdhury, also a former president of the BTMA, blamed the high prices of gas and cotton and the elevated level of the dollar price for the sharp depreciation of the taka for the widening losses of textile mills.

In January, the government raised the retail price of gas by 14.5 percent to 178.9 percent to lessen its unsustainable subsidy burden amid a narrow fiscal space.

And the taka has lost its value by nearly 30 percent against the US dollar since January last year, making imports costlier, central bank data showed.

Local spinning and weaving mills meet nearly 90 percent of the requirement of textile raw materials for export-oriented knitwear, now the biggest export earner in the apparel industry, and 40 percent of the demand of woven garments, according to industry operators.

Monsoor Ahmed, chief executive officer of the BTMA, said export-oriented mills are facing difficulty in accessing the Export Development Fund (EDF) to import cotton and yarn because of the dollar shortage.

The Bangladesh Bank has raised the interest rate on the loans made from its fund with an aim to make borrowing costlier with a view to saving foreign currencies. The forex reserves have fallen by about 25 percent since the Russia-Ukraine war began.

Ahmed said the problem of domestic market-oriented spinning mills is more acute since they have to depend on banks to buy raw materials from the overseas markets.

"The increased price of dollars has driven up the cost of imports."

Many local market-oriented mills have suspended production because of the shortage of raw materials, said BTMA President Mohammad Ali Khokon.

"Export orders for garments have fallen."

He said the market is not going to back to normalcy before March next year.

"We will have to stay afloat until then. So, we need support from the government and from banks."

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the cotton import data depicts the current state of the sector.

"The decline in import is natural."

He said most knitwear factories are running at 50-60 percent capacity as buyers are placing fewer orders.

"So, our consumption has declined. There is also no sign of recovery in the order flow."

Matin said the coming days are going to be "extremely challenging."

"We are getting a bleak picture in terms of gas supply," he said, citing media reports.

"We are really concerned about the energy issue. At the same time, the demand is not growing although the overall capacity has expanded."