RMG exporters in hot water

Adams Apparels in Dhaka’s Mirpur produced 10,000 pairs of pants for an Italian customer, and the consignment departed the facility on March 16 for the Chittagong Port.

The garments were unloaded on March 20 owing to congestion in the Inland Container Depots (ICDs), and the shipment took another nine days to start its voyage to Italy due to a vessel crisis.

“Not only in case of exports, but the lead time has also been lengthened when importing raw materials such as fabrics, chemicals, and other things,” Shahidul Islam Mukul, managing director of Adams Apparels, told The Business Post.

Mukul also said that because of an energy crisis, China increased the price of their cloth by $0.15 per yard. In addition, due to a variety of factors, they have increased their fabric price by 20 per cent.

“Compared to last year, fabric prices went up by roughly 40 per cent,” he noted.

Meanwhile, Md Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said he hoped to expand his sewing line but was unable to do so due to a lack of workers.

“There aren’t enough people to do the job. It’s quite difficult to finish manufacturing on time,” Hatem remarked.

On the other hand, Fazle Shamim Ehsan, chief executive officer of Fatullah Apparels, said that due to the high price of fabric in the local market, he now meets his fabric requirement through import.

However, he has been unable to maintain lead time due to the inland port’s partial cargo barrier.

“While the price of Indian yarn is lower than that of domestic sources, India is also experiencing a transportation difficulty,” Ehsan told The Business Post.

According to Asif Ashraf, director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), local yarn manufacturers have recently raised yarn pricing by $0.1-$0.2, increasing manufacturing costs.

Buyers, on the other hand, are refusing to adjust, as yarn is far cheaper on the worldwide market.

“When we received the order, we tracked the price of cotton on the international market at the time. True, the present cotton price is high, but the cotton used in the current yarn was purchased at least three months ago. So, why have yarn producers raised their prices?” he wondered.

Most clothing exporters, including Mukul, Hatem, Ehsan, and Asif, have been under pressure in recent months due to high yarn and fabric prices, vessel shortages, and worker shortages.

All these issues, on top of the Russia-Ukraine conflict and the Chinese energy crisis, have put them in hot water.

According to industry insiders, they are now trying to recover by reducing profit margins, raising worker salaries, and requesting longer shipment times from purchasers.

Though they believe they will be able to overcome the crisis by drawing on previous experience, some small exporters may leave the industry if they are unable to manage the crisis.

Why this crisis?

Industry insiders say that when the Covid-19 outbreak began, they were dealing with a number of difficulties. However, they have recently been attacked from all sides.

According to them, the main sources of pressure are port congestion, supply chain disruption, and yarn price increases.

Several exporters said that their suppliers had been unable to satisfy shipment deadlines for a long time due to China’s energy crisis.

“Previously, during energy shortages, suppliers did not require more than 15 days of additional time. However, because of Covid-19, they have been unable to guarantee shipment times,” Khosru Chowdhury, managing director of Nipa Group told The Business Post.

According to insiders, following Russia’s invasion of Ukraine, all Russian-bound ships from South and Southeast Asia have been barred from utilizing Singapore’s port.

As a result, these vessels are using Colombo port, which has experienced over-pressure vessel congestion, leading to a significant impact on the garment sector.

Furthermore, due to the increase in fuel prices following the Russia-Ukraine war, container prices increased by $500 to $2,000 depending on the brand and destination.

The price of containers had increased four to five times once before when the pandemic began.

Meanwhile, Bangladesh has been receiving a large number of work orders since the end of the previous fiscal year, according to apparel manufacturer owners.

Although the manufacturing process generates a large number of job opportunities, due to a shortage of competent people, the sector is still in crisis, and it is attempting to recover by training new workers.

Soring yarn price concerns exporters

Apparel exporters said that yarn manufacturers increased prices from $4.2 to $5 in December of last year, and it currently exceeds $5.

They said that, while they were attempting to adapt to past yarn price hikes, the new increase by yarn manufacturers put exporters and buyers under pressure.

“Yarn manufacturers seek profit, but we must consider the country’s and buyers’ interests. As a result, we’re dealing with the issue in a variety of ways, including decreasing profit margins,” Ehsan explained.

Meanwhile, Md Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), said they have no choice but to raise yarn prices because the global market is unstable and prices are rising every day.

“The knitwear manufacturer needs to be prepared because yarn prices are going to rise even more,” Khokon told The Business Post.