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Bangladesh’s denim producers are receiving a good number of orders from almost all traditional and non-traditional markets despite the ongoing global economic crisis and low demand for clothes in the international market.
This comes at a time when the country’s apparel sector is struggling, registering negative earnings in the last two months year-on-year, while buyers are also placing fewer orders than their capacity. Industry insiders said buyers in the European Union (EU) and other non-traditional markets have increased denim purchases from Bangladesh amid the global crisis. This is helping them tackle the crisis but prices remain low.
Besides, they said the flow of orders from the US market is still slow but is expected to gather pace soon.
Bangladesh is the largest denim supplier to the US and the EU markets, according to OTEXA and Eurostat.
Pioneer Denim Deputy General Manager Md Hasibul Huda told The Business Post the US and the EU economies slipped into a severe crisis when the Russia-Ukraine war began, which impacted Bangladesh’s apparel exports.
“The EU economy was impacted less than the US and is also recovering fast. That is why we [denim producers] have been receiving a good number of orders for the last three months. But the US market is still in trouble,” he said.
When a massive earthquake hit Turkey in February this year, many buyers shifted to Bangladesh with a good number of orders, which helped manufacturers here recover from the downturn, said Hasibul. “We even received orders from Vietnam in recent times, which has given us an advantage as well.”
Md Anwarul Isalm Rana, general manager of Beximco Textile, told The Business Post they had order shortages a couple of months back but are now fully booked.
“We are receiving a good number of orders from the EU and some non-traditional markets, such as India, Australia, and Japan, which is helping us recover. We expect the US market will recover soon.”
Pacific Jeans Director Syed Mohammed Tahmir said the denim sector is still in a good position and receiving excellent orders despite the global economic situation. “But we do not know how long it will sustain.”
US market still down
Denim manufacturers said when the Russia-Ukraine war started, everyone predicted the EU economy would become more volatile than others as the region is highly dependent on Russian gas. Russia reduced its gas supply at the time.
But the US economy fared worse than others, with record inflation hitting the country. Amid that, the US authorities increased interest rates to combat inflation, which reduced consumers’ purchasing capacity.
As a result, Bangladesh’s apparel exports to the US market declined by 25.95 per cent in the November-March period of FY23 year-on-year in terms of units.
Industry insiders said cloth sales in the US market declined drastically since the end of last year, causing brands to end up with huge goods in their stocks. As a result, they ordered fewer products from Bangladesh and other countries.
But they started offering discounts during Christmas to empty their stocks and almost succeeded.
A high official of Li & Fung told The Business Post warehouse charges in the US are very high, which is why buyers there focused on emptying their stocks since early this year.
“Due to this, American brands placed fewer orders. But the good news is denim items, especially jeans, are used in all seasons, and brands are able to release their stocks. “Besides, the US inflation rate is going down. I think buyers will place a big volume of orders in the upcoming months.”
Pioneer Denim’s Hasibul said, “Buyers in the US have already started contacting us to place orders. As they have emptied a large segment of their denim stocks, Bangladesh will receive a big volume of orders soon.”
Low prices a major concern
Although Bangladesh’s denim producers and jeans manufacturers received good orders in recent times, exporters claimed prices are very low and they are even producing below the break-even point in some cases.
Industry insiders said they made big investments to set up high-tech machinery to reduce water consumption and carbon emissions. They reduced water consumption for per kg denim wash from 360 litres to 10 litres, but brands are yet to increase product prices citing poor business. Besides, gas, fuel, and electricity price hikes have put them in hot water. So despite receiving good orders, denim producers are struggling.
Hasibul said, “Brands are pressuring us to reduce production costs due to the global crisis. But our production costs rose by up to 15 per cent due to power and energy price hikes.
“Amid this, we have to produce denim at low prices, sometimes even below the least possible rate, to survive.”
He added, “We have to pay our workers and other bills every month. If we do not have work orders, how will we meet those expenses? We, however, believe the situation will improve.”
Bangladesh Apparel Exchange Founder and Chief Executive Officer Mostafiz Uddin told The Business Post sustainable apparel production expenses should be shared by manufacturers, brands, and retailers as climate change is a global crisis.
But only manufacturers are bearing all expenses, he said, adding brands should increase prices so that sustainable apparel production can continue and the world can thus be saved.
Azizur R Chowdhury, managing director of JM Fabrics, said, “We need to take some steps, such as organising exhibitions and roadshows in export destinations, to create awareness among consumers.” “When we will be known and recognised for sustainable apparel manufacturing, brands will be bound to pay more due to the pressure created by consumers,” he added.
