India gains strong foothold

India holds the highest export share of cotton and cotton yarn in Bangladesh with growing dominance as the import leans on the neighbouring country due to an affordable price and low freight cost.

The recent data of the United States Department of Agriculture (USDA) shows that India held 32 per cent market share in terms of cotton export from August 2020 to July, 2021 as against 23 per cent year-over-year.

On the other hand, till August 2021, Bangladesh imported $ 1.18 billion cotton yarn, with total import standing at around 1.42 billion.

“Over the first nine months of 2020, the value of cotton yarn import is up over 12 per cent to $ 692 million compared to $ 617 million in 2019 while China alone exported over $ 148 million worth of cotton yarn to Bangladesh this calendar year and over $ 225 million in 2019,” according to the USDA data.

However, according to the Bangladesh Textile Mills Association (BTMA), in 2019, there were more than 433 spinning mills in Bangladesh that could produce 2.9 million metric tons of yarn per year. Despite the large domestic spinning capacity, Bangladesh imported more than $ 850 million worth of cotton yarn in 2019.

Industry insiders said cotton and cotton yarn price in Indian market is much cheaper compared to that in Brazil and US that lead them to rely on India.

“We imported cotton yarn from India due to its availability and cheap freight cost, but land port border is not business friendly,” Fazlee Shamim Ehsan, vice-president of Bangladesh Knitwear Manufacturers and Exporters Association told The Business Post.

“It is true that the dependency on India about cotton import increased but we also make import from US, Brazil, Canada, Australia and other countries.”

From the second quarter of 2021, Bangladesh’s RMG sector began to see increased orders from Europe and the United States as their economies bounced back. So for good export orders, Bangladesh has a huge raw cotton demand to manufacture clothes.

In the first 10 months of 2021 earnings increased by 28 per cent to $ 28.5 billion.

Bangladesh Garment Manufacturers and Exporters Association President Faruque Hassan said, “Currently we have quite good work orders and buyers are paying good price.”

The USDA suggests that Bangladesh’s clothing industry will consume around 8.81 million bales of cotton in the Marketing Year (August-July) of 2021-22 which was 8.51 million bales in MY 2020-21.

At the same time around 151 thousand bales of cotton will be produced from domestic sources. According to the Centre for Policy Dialogue, 70.74 per cent apparel goods are made by cotton.

According to the USDA official forecast, Bangladesh has to import 8.2 million bales of cotton in MY2021-22. Due to quite good export earnings, demand will increase by 1.2 per cent.

In 2021, raw cotton imports have increased because of high yarn demand by the domestic industry. As of October 2021, Bangladesh’s cotton imports increased by 24 per cent compared to what was made in the same period in 2020.

Production cost on the rise

The USDA data said the 23 per cent fuel price hike has shot up the costs of power generation, transportation of raw materials and services in the textile and RMG sectors.

On the other hand, the global cotton price has also witnessed a spike from September 2020 to till now. Currently, per kilogramme 30-count cotton yarn sells at $ 4.7 to $ 4.8 which was $ 2.25 to $ 2.30 during the pre-pandemic time.

“In addition, the container fare has also risen by 350 to 500 per cent, dye-chemical costs by 4 per cent, wages by 7.5 per cent, and electricity by 13 per cent that have led to rise in clothes manufacturing cost,” according to the USDA report.