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Saturday, July 13, 2024

Closed spinning mills in Bangladesh increase yarn imports

As Bangladesh’s textile and spinning mills are struggling to produce yarn that forced fabric and apparel makers look elsewhere to meet the demand.

Data from the Bangladesh Bank reveals that the apparel industry imported yarn worth $2.64 billion in the July-April period of the just-concluded fiscal year, compared to $2.34 billion during the same period in FY23.

Gas supply crisis has also become a critical component in this situation. Typically, garments and textile mills require around 8-10 pounds per square inch (PSI) of gas pressure to run at full capacity. However, gas pressure drops to 1-2 PSI during the daytime, significantly impacting production which continues even into the night in the major industrial zones, according to the Bangladesh Textile Mills Association (BTMA).

Low gas pressure has crippled production forcing 70-80% of mills to operate at around 40% of their capacity, industry owners say. The spinning mill owners are concerned about meeting supply deadlines.They concede that if spinners fail to supply yarn on time, garment owners may be forced to import yarns. The entrepreneurs also noted that reduced production has raised costs and reduced cash flow, making it challenging to pay workers’ salaries and allowances on time.

Apparel exporters have also recognised the challenges faced by textile and spinning mills. They noted that disruptions in gas and electricity supply have significantly impacted operations at RMG factories as well.

In the Narayanganj area, gas pressure was at zero before Eid-ul-Adha, but it has now increased to 3-4 PSI. Nevertheless, this pressure is insufficient to operate all machines, which affects their lead times. As a result, most dyeing factories are operating at 50 percent of their capacity.”

According to a central bank circular issued on 30 June, the cash incentive for local export-oriented textile mills has been reduced from 3 percent to 1.5 percent. Approximately six months ago, the incentive rate was 4 percent.

Industry players warned that RMG industry may become an “import-dependent export industry” if government policies are not revised to enhance the competitiveness of local industries.

“The price of a 30/1 count yarn, commonly used for making knitwear, was $3.70 per kg a month ago, but it has now dropped to $3.20 to $3.25. Meanwhile, Indian spinners are offering the same yarn even cheaper at $2.90 to $2.95 and apparel exporters are going for yarn imports considering the cost benefits.

Last month, the BTMA sent a letter to Petrobangla Chairman Zanendra Nath Sarker, highlighting that the gas crisis has severely impacted factory production with supply line pressure in some member mills dropping to near zero. This has caused significant machinery damage and halted operations. The letter also noted that the price of gas per cubic metre had increased from Tk16 to Tk31.5 in January 2023.

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