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Stocks heaping up as jute exports dwindle

Arifur Rahaman Tuhin
06 Dec 2022 00:00:00 | Update: 06 Dec 2022 01:02:37
Stocks heaping up as jute exports dwindle

Jute and jute goods exports are declining due to several reasons, including the global economic crisis, leaving huge unsold raw jute and almost ready goods in stock of farmers, traders, and warehouses.

The Export Promotion Bureau (EPB) data shows export earnings in this sector fell by 11 per cent to $406 million in the first five months of the current fiscal year from $456 million in the same period of FY22. The earnings were 15.37 per cent less than the commerce ministry’s target.

The data also shows the sector earned $553 million in the same period of FY21 when the world was facing severe crises due to the deadly Covid-19 pandemic.

Many factories have now started downsizing to cut losses while farmers are also losing interest in producing the golden fibre.

Akij Jute Mills, the largest private mill in the country, cut nearly 6,000 jobs for casual workers in November due to low export volume and big losses.

Bangladesh Jute Mills Association (BJMA) Chairman Md Abul Hossain told The Business Post export earnings were dwindling due to the global economic crisis, causing stocks in many factories to grow.

“Many factories are also laying off workers due to losses. We urged the government to provide policy support like the apparel sector, but that has not happened yet.”

The EPB data shows earnings from jute and jute goods rose to $1.16 billion in FY21 from $882.35 million in FY20. The high earnings came at a time when the world was facing the Covid-19 pandemic and the government shut all state-run jute mills.

Raw jute prices in the domestic market then went up and farmers were also motivated to grow more jute.

But due to high freight costs, political instability in the export destinations, and the economic impacts of the pandemic, the demand for jute and jute goods declined. That is why export earnings in this sector decreased to $1.12 billion in FY22.

At a time when the sector was already facing an order crisis, Russia invaded Ukraine in February, which aggravated the situation.

“The war put us in hot water and orders dropped further. Due to the war, most of the countries are facing high inflation,” Esrat Jahan Chowdhury, chief executive officer of Tulika Eco and director of Bangladesh Jute Goods Exporters Association, told The Business Post.

She said jute is one kind of luxurious item.

“At a time when people are struggling to meet even their basic necessities, how will they purchase costly jute goods? We will receive more orders if we can produce goods at low costs. But the premium quality raw jute prices are still high,” she added.

Current situation

Several raw jute traders told The Business Post they have hundreds of tonnes of raw jute in stock but there are only a few buyers. Raw jute trader in Jamalpur Md Mominur Islam said he has nearly 300 maunds of unsold premium quality raw jute. Md Mizanur Rahman in Kushtia said he has nearly 800 maunds of raw jute in stock.

Another trader Shaon from Rajbari said he has been holding nearly 1,200 maunds of premium quality raw jute in stock for a long time and could not sell it due to customer shortages.

“Many farmers in my area also have thousands of maunds of raw jute in stock. The situation is the same all over the country,” he added.

Millers said most mills have hundreds of tonnes of jute yarn and fabrics in stock while many even failed to export the previous season’s goods, which is why factories are bound to cut their workforce. They also said in addition to the global economic crisis, high raw jute prices in the domestic market and poor marketing are also among the key reasons behind this situation.

Monami Impex Director Syed Ali Alfe Sany Akash said there are almost no factories that do not have the previous year’s jute in stock. “How will they continue business?”

He said EPB data shows excellent export performance in FY21 but the reality is value went up due to high prices but it is declining in terms of quantity.

Diversification, better marketing stressed

According to the EPB, Bangladesh is still exporting traditional jute items, such as bags, sacks, yarn, and raw jute. After importing these, buyers are making value-added items, such as carpets, premium quality bags, and others.

As raw jute exports were opened, India, China, and Pakistan are now focusing on importing from Bangladesh and then exporting to other countries. That is why raw jute is becoming more important to buyers than yarn and fabrics.

On the other hand, due to the global economic crisis, consumers have also started reusing jute goods.

Oporajeo Chief Executive Officer Kazi Monir Hossain said consumers do not make new purchases if they think they can reuse bags or other goods. “We need new export items but are not focusing on that.”

He said Bangladesh could earn hundreds of millions of USD through exporting premium quality bags. “But due to a lack of innovation and poor marketing, we are not getting opportunities.”

Esrat said the apparel sector was working on product diversification and the government was also providing policy support for that but the jute sector was lagging far behind.

India’s anti-dumping duty

In January 2017, India imposed an anti-dumping duty, ranging from $19 to $352 per tonne for five years, on jute exports from Bangladesh.

After the period expired on January 1 this year, the neighbouring country started a review to keep the duty for a longer period and finally decided to do so.

BJMA Chairman Abul Hossain said India would be a big market if the government could negotiate with them. “Due to export barriers, we are able to export only raw jute.”

Esrat said the Indian business community is interested in withdrawing the anti-dumping duty.

“We believe if our commerce and foreign ministries take strong initiatives, India will lift it. If the duty is removed, Bangladesh will be able to earn at least $300 million annually from India through exporting jute.”