Bangladesh’s textile and apparel industry incurred losses, or saw lower profits in the January-March quarter of the current fiscal due to strong dollar, energy shortage, and a slowdown in global market demand because of the Russia-Ukraine war.
The textile industry in Bangladesh is dependent on import of most of its inputs that are used by the apparel sector. This includes fabric, yarn, dyes and numerous accessories. The dollar shortage affected the local textile industry as most of them are not able to open letters of credit (LC) for the import of raw cotton despite it becoming cheaper in the global market, affecting apparel prices.
The country’s listed companies in this sector saw a sharp fall in profit during the first quarter, according to the data of the Dhaka Stock Exchange (DSE) The DSE data shows that 45 out of 58 listed companies published their January to March quarter financial statements. Of them, 17 incurred losses while the profit of 16 companies declined compared to the same period of the previous fiscal.
Only 12 companies made a profit.
Meanwhile spinners in Bangladesh are facing torrid time as the production costs have gone high due to hefty increase in power and energy rates. They also faced cotton shortages that could not be imported due to dollar shortage. Only spinners that produced diversified yarn instead of basic ones are still getting orders and making a profit amid such a tough time.
Another drawback spinners faced was from imported yarn that has flooded the local market. According to the National Board of Revenue data, Bangladesh imported over 76,000 tonnes of yarn in the third quarter of FY23. Industry players say this yarn could have been produced by Bangladeshi textile millers.
They said due to energy shortage and lack of orders, many factories have already shut down and over 40,000 employees in this sector have lost their jobs.
Moreover the spinners claimed that Indian yarn flooded the local market illegally. India’s yarn production capacity is almost ten times higher than Bangladesh’s. They are also facing low demand in their market. That is why, some are focusing on exporting to Bangladesh at any cost.
Still, Bangladesh is in a better position than other competing countries as it can produce much value-added yarn locally while the orders fell by 30 percent. The market will hopefully return to a positive trend by the end of this year, hoped one exporter.
According to DSE data, 48 textile and apparel companies’ share prices were stuck at the floor price as their business is not in good shape and 12 companies were traded at below their face value.
