Cotton price drop can’t cheer up garment makers

International cotton prices have significantly fallen but brought little cheer to local spinners and garment manufacturers suffering from a drop in work orders from international retailers and brands.

The price of cotton fell to $1.01 to $1.04 per pound in international futures markets yesterday from $1.20 to $1.30 in May and June.

This resulted from a drop in demand for garment items in major export destinations like Europe because of high inflation stemming from the Russia-Ukraine war.

Since Bangladesh is a net importer of cotton, the local millers and garment manufacturers should have been happy from the price drop of the widely used white fibre. But the scenario is the opposite.

The millers and spinners are not happy because their old stocks of yarn made from more expensive cotton has remained unsold in their warehouses.

Unsold stocks of yarn of 300 spinning mills already amount to 6 lakh tonnes, said Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA).

Lower inflow of work orders for garment items from international retailers and brands affected cotton price in global markets

Since, the yarn in the inventory was made from an expensive cotton, the spinners cannot sell those at low prices. As a result, production of yarn has also been lowered at mills, which also affected the import of cotton.

"If the price of a kilogramme of yarn is set to at least $4.50 in the local markets, the total value of unsold yarn in the mills is $2.70 billion," Khokon said.

The lower inflow of work orders for garment items from the international retailers and brands affected the cotton price in international markets, he said.

So, the millers and importers are not much interested in importing cotton now because of the stocks of unsold yarn, he added.

At the same time, the local millers, spinners and importers might not take advantage of the falling price of cotton in international markets because of the unsold inventory of the yarn at the mills, Khokon said.

"If the cotton price falls, we will be more competitive in international markets," said Md Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BTMA).

However, this time garment manufacturers are not happy even with the price fall of the cotton because the international retailers and brands are putting their work orders on hold, he said.

Azim said it would take a few months for normalcy to return to the global fashion markets as double digit inflation in Europe, the main export destination of Bangladesh, has been having a severe impact on consumers.

No cotton price fluctuation is expected at this moment, said Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), a platform of knitters and the highest consumers of cotton on the local markets.

"We want a stable cotton market for a few months," he said.

Because if cotton prices go down now, international retailers and brands will negotiate again for lowering prices of garment items, a pressure which buyers always exert on local manufacturers, Hatem said.

Moreover, the inflow of work orders is still low from international retailers and brands as demand has fallen, which also created a big inventory of unsold items in the Western world, he said.

"We may negotiate prices with buyers in the near future with the falling trend of cotton prices in the international market, if it continues for a long time," Hatem said.

Monsoor Ahmed, additional director of the BTMA, said the gas crisis was a major challenge for textile millers as they cannot run their mills at full capacity.

The stockpiling of yarn added new woes amidst the perennial scenario pertaining to the low gas pressure, which has affected the sector severely, he said.

Ahmed said the textile millers and export-oriented industry owners were scheduled to hold a meeting with the government high-ups today on the gas crisis to find a solution as exports were being affected.