The impact of COVID-19 has been as devastating for the readymade garment industry — which faced massive order cancellations from global buyers — as it has been for the primary textile sector of Bangladesh.
Subsequent to the countrywide shutdown, which rendered both RMG and textile units shut for a substantial period, order cancellations (of garments) from global buyers, and no new order coming in, the textile mill owners have had to withstand the ripple effect of the pandemic after reportedly suffering losses to the tune of more than Taka 20,000 crore.
However, of late, as things started improving and new work orders from retailers coming in now, there’s an increase in sale of yarn and fabrics of export-oriented spinning and weaving mills, which has sort of infused a sense of enthusiasm and the textile sector is breathing a sigh of relief once again, hoping for a rebound as apparel exports pick up momentum.
To put things in perspective, after months-long, protracted export reversals, Bangladesh’s export earnings made a rebound in July with around 0.59 per year-on-year growth. As per figures provided by the country’s Export Promotion Bureau (EPB) in July 2019, Bangladesh’s export earning was US $ 3.88 billion which in this July stood at US $ 3.91 billion.
The export earning this July is also around 44 per cent more than that of June.
Further, apparel export raked in US $ 3.2 billion, which was 14.1 per cent more than the target set for July by the Commerce Ministry.
It may be mentioned here that export revenue in the apparel industry witnessed a year-on-year decline of 18.29 per cent in March, 82.85 per cent in April and 61.57 per cent in May, as economies the world over went under lockdowns in a bid to curb the spread of the coronavirus pandemic. However, as restrictions were lifted and a state of normalcy returned to the global supply chain, export earnings again picked up with receipts from apparel exports reaching US $ 2.71 billion in June, which was just 2.5 per cent less than what it was during the same period of the previous year.
With apparel exports showing signs of improvement, sale of fabrics from local mills also started to increase.
Demand has been increasing a lot from the buyers for yarn and fabrics, stated Mohammad Ali Khokon, President, Bangladesh Textile Mills Association (BTMA), the platform for spinners and weavers, while adding that some mills were running at 70 per cent capacity, and the others are operating at 65 per cent and some at less than 60 per cent, as the demand for yarn and fabrics has been increasing.
Before the pandemic, the BTMA President reportedly used to sell yarn worth US $ 55 lakh on an average every month, but during the pandemic, the sales from his mill were negligible. However, with the reopening of the economy, he sold yarn worth US $ 23 lakh last month and another US $ 12 lakh this month, so far.
“Maybe this month’s sale will be low, but I am hopeful that the sales will grow from next month, as I’m receiving a lot of responses from my buyers,” Mohammad Ali Khokon added.
So, even as sale of yarn and fabrics started picking up, cotton import is also tipped to return to pre-pandemic levels by the year-end.
It may be mentioned here that cotton imports witnessed a slump for the first time in over a decade last fiscal year due to a fall in demand from local mills amidst a stunning drop in apparel work orders.
In fiscal 2019-20, Bangladesh imported 7.1 million bales of cotton, down 13.4 per cent from a year earlier, according to data from the BTMA. As in previous years, cotton imports were on the rise up until February due to the high demand for yarn and other fabrics from garment exporters.
However, imports crashed from then onwards, as most garment factories were shut down after the Government declared a 2-month ‘general holiday’ on 26 March aimed at curbing the spread of the virus.
As a result, most spinning and weaving mills were also shuttered. When the nationwide lockdown eventually came to an end on 30 May, most mills resumed operations with previous stocks of cotton rather than importing more despite the significant fall in price for the cellulose fibre at international markets.
Cotton is now reportedly trading at between US $ 0.62 and US $ 0.64 per pound in the New York Futures markets, down from the previous range of US $ 0.70 to US $ 0.75 during the pre-pandemic times.
It may be mentioned here that almost all of Bangladesh’s domestic demand for cotton is met through imports, as local growers can only supply less than 3 per cent of the country’s annual demand. “Since last month, the consumption of cotton has started growing, as garment factories resumed production after about 3 months,” said Khorshed Alam, Managing Director, Little Group, a leading cotton importer and consumer.
The pandemic is the sole reason for the declining trend of cotton imports, said Razeeb Haider, Managing Director, Outpace Spinning Mills.
“I am very much hopeful that cotton imports will rise again soon, as the demand for yarn and other fabrics has been increasing gradually,” Razeeb stated, while adding that most garment factories in Bangladesh were running at 75 per cent of their total production capacity and this indicates that work orders are coming back.
The demand for various fabric materials could go even higher after September if the international retailers continue to source their products from Bangladesh at the current pace, Razeeb explained.
Agreeing with Alam and Haider on the issue, Mohammad Ali Khokon said that more than 50 per cent of the annual sales target for fabrics had been met by July. “I hope sales recover by more than 75 per cent by September and fully by the year-end,” Khokon said, while underlining that by January next year, sales should return to its previous growth rate.
It may be mentioned here that according to reports, around 11,000 micro, small, medium and large spinning, printing, dyeing and weaving mills were unable to produce any goods in March and April for the fear of coronavirus. As a result, the millers missed two mega sales events – Pohela Boishakh and Eid-ul-Fitr.
Currently, there are about 450 spinning mills in the country, with total investment in the sector standing at Taka 40,000 crore. Besides, Taka 30,000 crore has reportedly been invested in the weaving and dyeing sectors as well.
Meanwhile, as demand for cotton increases in Bangladesh, India is reportedly planning to raise its cotton exports to the former. According to reports published in an Indian English news daily, the Cotton Corporation of India may send 1.5 million to 2.0 million bales of fibre to Bangladesh before the new crop begins arriving in October.
“If local mills can buy cotton from the nearest source at an affordable price, it will be beneficial for the country,” underlined Atiqur Rahman, Managing Director, Rahman Knit Garments Limited.
It may be mentioned here that Bangladesh vies with China as the world’s biggest buyer of cotton and imports cotton in substantial quantities from overseas destinations including West Africa, CIS (Commonwealth of Independent States), USA, Australia, etc.
So, if the recent turn of events is anything to go by, the primary textile sector of Bangladesh is definitely set for decent business in the days to come.