Rising yarn prices

Local garment exporters are feeling the pinch due to a rise in yarn prices in the local and international markets, a development that is threatening to derail the recovery of the apparel shipment from the pandemic-induced slowdown. According to a report published in this newspaper on Sunday a rise in international cotton prices has had a ripple effect on local yarn, affecting the garment sector during the ongoing coronavirus pandemic. Cotton prices have gone up in international markets mainly for increased imports by China, the largest consumer worldwide, because of a recovery trending among businesses. Moreover, China and Pakistan, despite themselves being major producers, have increased their import targets because of high prices prevailing in China and lower production in Pakistan. Since Bangladesh is not a major cotton-producing nation, 99 per cent of the requirement for the raw material is met through imports. Traders, importers and millers import 8 million bales of cotton, spending $3 billion a year. Last year though cotton imports fell to 7.2 million bales as production halted in many mills after the government had imposed nationwide restrictions to tame the coronavirus pandemic.

Experts have said that the price increase in the local market is not totally consistent with the rise in the international market. Garment exporters allege that the spinning millers unfairly and abnormally increased yarn prices amid rising demand and soaring cotton prices in the global market. This has put the exporters in a sticky situation as yarn prices have repeatedly been going up for the last several months. On the other hand, textile millers denied the allegation and claimed that they are not hiking prices intentionally. 

Be that as it may the fact is, as stated in the report, that increased yarn prices have sent apparel manufacturers and spinners on a collision course. The garments and home textile manufacturers have been asking the spinners to reduce yarn prices for a long time. Clothing sales across Europe and US are growing as a result of store reopenings following mass vaccination drives. Consequently, orders placed with Bangladesh’s garment suppliers are also on the up. The problem is impacting the competitiveness of Bangladesh’s RMG industry. Despite having capacity to deliver, local apparel exporters are facing difficulty in availing the opportunity of increased work orders because of the rise in yarn prices. The increase in yarn price has pushed up the production cost of a finished exportable garment item by 25 per cent. But buyers are offering a 5 per cent to 10 per cent increase. Some local suppliers are not getting any additional prices from the buyers as retailers and brands booked the orders at least six months ago when the prices of cotton and yarn were lower. Many apparel makers are even taking orders at a rate below their production costs as a result of price hike.

Not only are the apparel exporters feeling the pinch, the handloom industry is also suffering because of the rise in yarn prices.

Garment exporters are still facing financial difficulties because of worst ever worldwide recession and low unit value realization from the overseas market and it would take some more time for the world economy and the apparel trade to revive. A secure policy is urgent to build stable yarn price because abrupt changing without prior notice is having an adverse effect on the manufacturing sector. There must be a policy in place to ensure stable yarn prices as it is fluctuating abruptly and changing frequently without prior notice.

As stated earlier increased yarn prices have sent apparel manufacturers and spinners on a collision course. Unless this is addressed through a policy that looks at the entire supply chain the tussle between them is likely to increase further.  We believe that the authorities concerned should take at least temporary measures to bring stability to yarn prices. The stakeholders should have meetings with the government policymakers find a way to ensure reasonable prices of yarn in the local market.