Rising yarn prices put spinners, apparel makers at loggerheads

Rising yarn prices have sent the apparel manufacturers and spinners on a collision course, as Bangladesh’s textile industry is recovering from the Covid-19 economic fallout.

The garments and home textile manufacturers said they had been asking the spinners to reduce yarn prices for a long time.

Bangladesh has 433 yarn manufacturing mills (spinning mills) and they meet 80 per cent of the domestic demand.

Before Covid-19, per kg 24s (single) and 30s yarn prices ranged between $2.25 and $2.30 in the domestic market. But it now costs $4.25 to $4.30, textile manufacturers said.

In the global market, yarn prices increased to $3.65 from $2.10 since the virus outbreak, manufacturers said.

Bangladesh makes 75 per cent of apparel from cotton-based yarn and around 60 per cent of total production cost was spent on fabrics.

Due to the high price of yarn, the production cost increased by 30 per cent, apparel manufacturers said, adding that the buyers did not increase the price by more than 10 per cent.

This has led to rising tension in the largest export sector in Bangladesh, business insiders said.

“This is an unethical business by yarn manufacturers. They held us hostage during the Covid-19 period to make an excess profit,” Mohiuddin Rubel, Director of Bangladesh Garments Manufacturer and Exporters Association (BGMEA), told The Business Post.

“The buyers are putting pressure on us to reduce the price, but how can we do it?” Rubel asked.

The yarn manufacturers claimed they have little to do now and asked the apparel owners to wait until the demand for yarn was reduced, which they said would automatically reduce the price.

“The price depends on the demand and supply curve. Yarn price is rising due to higher cotton prices in the global market and excess demand,” Fazlul Hoque, vice-president of Bangladesh Textile Mill Association (BTMA), told The Business Post.

“From January, cotton prices in the international market increased by 47 per cent, but we increased yarn prices by only 37 per cent. So how could they blame us?” he said.

Officials of two trade bodies in the readymade garments sector, BGMEA and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said they were trying to find an amicable solution.

On August 11, apparel leaders held a meeting with yarn manufacturers, where both parties agreed to keep the unusual price hike of yarn in the domestic market in check and committed not to increase yarn prices quoted in the pro forma invoices (PI), issued on August 10 at the latest.

They also agreed to hold another meeting to discuss the soaring yarn price, though no date was fixed.

Apparel manufacturers said they would seek the government’s intervention if the spinners fail to act.

“We will seek the government’s intervention if the issue is not resolved,” Fazlee Shamim Ehsan, vice-president of BKMEA and a director of International Apparels Federation, told The Business Post.

“We believe any issue can be solved with good intention … if not, then we will find an alternative way,” he said.

Yarn manufacturers said they would accept if the government fixed any price. “If the government fixes a price, all of us are bound to accept it,” said BTMA Vice-President Fazlul Hoque.

“We suggest the apparel manufacturers ensure fair price from the buyers, not blame us or put pressure on us,” he said.

Some garment owners said they have already started importing yarn from India and others indicated they would follow the same path.

But due to a bar on partial shipment in the land port, they cannot meet the buyer’s lead time.

The BGMEA, BKMEA and other textile sector associations urged the government to remove the bar on the partial shipment.

But experts warned that doing so would see the yarn market go to India and the domestic manufacturers suffer in the long run. It will also increase the chance for yarns to be smuggled from India, they said.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, said a rising demand and increase in raw material prices had created unrest in the local yarn market.

“The government should allow conditional partial shipment from India for a short time considering the overall situation. But it must pay attention to stop money laundering in this process and ensure that the yarn does not go to the black market,” he told The Business Post.

Apparel manufacturers ruled out the possibility.

“There is no chance of yarn smuggling if the law enforcers remain vigilant. If the government withdraws the ban on partial shipment, we will be able to import yarn within a week,” said Shahidullah Azim, vice president of BGMEA.