Exports of jute and jute goods from Bangladesh declined in the last fiscal year due to the unprecedented surge in shipping costs and the higher price of raw fibres.

Jute millers fetched $1.13 billion by selling jute and jute-made products in the fiscal year that ended on June 30, down 2.91 per cent year-on-year, data from the Export Promotion Bureau (EPB) showed.

Earnings from the main exportable yarn and twine dipped 12.67 per cent to $697.80 million.

Mohammed Mahbubur Rahman Patwari, a former chairman of the Bangladesh Jute Mills Association (BJMA), blamed the spiralling freight costs for the decline in the exports of jute and jute goods.

The container freight cost rocketed nearly 10 times to $10,000-$15,000 from $1,000-$1,500 since the pandemic struck the world.

This means if the price of a container full of products is $40,000, the total costs, which include the freight charges, come at $50,000.

"When our products reach Turkey, the total costs exceed the prices of the local products in the country," said Patwari.

So, Bangladeshi exporters are being compelled to sell their products by incurring the loss equivalent to the freight charges, he said.

"We are in hot water."

Jute yarn accounts for two-thirds of the export earnings from the sector, EPB data showed. The product is used in carpets and Turkey is the main buyer for yarns produced in Bangladesh.

But many buyers are using recyclable cotton to make carpets, Patwari said.

Higher prices of the raw jute in the local market, driven largely by manipulation perpetrated by middlemen, mean exporters can't remain much competitive in the international markets when they have to buy the raw material at higher costs.   

"If the prices decline in the domestic market next season, we will get relief to some extent," Patwari added.

Exporters say a fresh blow for the industry comes several months after export receipts hit $1.16 billion in the fiscal year of 2020-21, the highest on record, driven by a higher price of raw jute and an increased demand.

According to millers who produce yarn, twine, bags, sacks and other jute goods for mainly export markets, buyers reduced orders against the backdrop of spiralling prices of the natural fibre, which hit a historic high of more than Tk 5,000 per maund in February this year owing to the stockpiling by the middlemen and a decline in production of the crop last season.

Usually, raw jute is sold at Tk 2,500-Tk 3,100 per maund, especially during the harvest period.

Patwari says costs are still high and international buyers are switching to alternatives to jute goods.

Jute sack and bag makers were the hardest hit as their shipment fell 14 per cent year-on-year to $119.23 million in FY22.

Abdul Barik Khan, secretary general of the BJMA, says there is a lack of policy support to promote the sector, which involves about five crore people.

The government formulated the Mandatory Jute Packaging Act in 2010 to cut the use of plastics and promote eco-friendly fibre. But it has not been implemented properly yet.

This prompted the association to move to the High Court this year and file a writ petition. The court, on June 28, directed 14 ministries and departments to inform it within 60 days as to why the law has not been implemented, said Khan.

He pointed out that the Bangladesh Bank has formed the Export Development Fund, which lends to exporters at only a 2 per cent interest rate to allow them to import raw materials, including yarn.

"But when we buy jute from our own farmers, we pay at least 9 per cent interest." 

He demanded the fixation of the maximum price of raw jute and urged the government to take strict measures against illegal hoarding.

Amid declining export volume, the government has extended a 20 per cent cash incentive for the shipment of diversified jute products such as food-grade bags, clothes, yarns, and twines.

Exporters have to ensure the use of the natural fibre equivalent to at least 50 per cent of the export price, said the central bank in a notice recently.

The cash incentive for hessian, sacking and carpet backing cloth is 12 per cent.

Farmers in Bangladesh have grown roughly 80 lakh bales of jute annually over the past five years.