Unsold yarn piles up for falling garment exports

The unsold yarn at the spinning mills of Bangladesh is piling up abnormally because of a fall in work orders by 30 per cent for apparel items from international clothing retailers and brands. 

The amount of inventory of yarn has already crossed five lakh tonnes in the last two months, according to the Bangladesh Textile Mills Association (BTMA).

Razeeb Haider, managing director of Outpace Spinning Mills, said the volume of unsold yarn with his mills has increased to 1,600 tonnes as of last week.

"The stock began to go up two months ago as demand for garments fell."

Before the latest slowdown kicked in, Haider's mills would have a stock of yarn of 500 tonnes to 600 tonnes, which the entrepreneur considers normal.

The piling up of unsold yarn is widening owing to the fall in orders for apparel items from international buyers, said Md Masud Rana, managing director of Asia Composite Mills, which consumes 40,000 tonnes of cotton a year.

Mahin Group is also feeling the pinch of slowing exports.

"The stockpiling of yarn is taking place, not for the price factor but for the demand factor as buyers are delaying placing orders for the higher inflationary pressure in European countries," said Abdullah Al Mahmud Mahin, chairman and managing director of Mahin Group.

The consumption of yarn by the export-oriented garment factories dropped to nearly five million kilogrammes a day from 12 million kgs earlier.

Similarly, the production of yarn in the mills that cater to the domestic market has also gone down significantly amid a sharp decline in demand among consumers struggling for record prices.

Spinners in Bangladesh are facing a double whammy in the yarn business.

On the one hand, they are running their production units at 50 per cent capacity because of a severe gas and power crisis. On the other hand, the volume of unsold yarn has grown.

The inventory would have grown further if millers could run their operations at full capacity with adequate gas pressure, industry insiders say.

Because of the sales drop, the primary textile sector, which has seen an investment of about $20 billion so far, has come under major threat.

In some cases, the sales of yarn have dropped by more than 50 per cent over the last two months for the economic crisis in major export destinations in Europe.

Currently, local spinners can supply 90 per cent of raw materials to the knitwear sector and 40 per cent to the woven sector, Bangladesh's two biggest export-earning segments.

In recent years, the demand for locally spun yarn and fabrics has grown among manufacturers as domestic production has allowed them to cut long lead time.

At least 30 additional days are required for garment exporters if they ship goods made from imported fabrics from China.

Despite the country sitting on a huge volume of yarn, some manufacturers are importing the textile raw material from other countries like India, hurting the local industry, a number of millers say.

This led them to demand the government take steps to stop the import of yarn with a view to protecting the domestic industries and the foreign currency reserves.

Mohammad Ali Khokon, president of the BTMA, said the primary textile sector is facing a multipronged challenge for the Russia-Ukraine war, higher inflation in Europe and the gas crisis in Bangladesh.

He demanded a 90-day additional time for the payment of loans under the central bank's Export Development Fund so that millers can weather the impacts of the unsold yarn.