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Global turmoil hits local spinners

Global economic troubles accompanied by some internal factors have forced spinners in Bangladesh to lower their production, which emerged as a threat to the growth of the sector.
Industry insiders said they are now utilising only 60-70 percent of their production capacity as demand for yarn has declined in recent times. The industry people identified five major challenges in spinning business: stockpiling of unsold yarn, arrival of low-cost Indian and Chinese yarn, debt crisis in Europe, introduction of the single-stage generalised system of preferences in Eurozone and low gas pressure.
 

The spinners spun yarn from high-priced imported cotton, but cotton prices have recently declined on the global market. Now weavers and knitters are reluctant to buy yarn at high prices. As a result, a huge quantity of yarn remained unsold. To boost demand, the government, however, declared some incentives for exports of garment products made of locally-spun yarn. The trouble intensified for the sector with the import of low-priced Indian yarn. India can sell yarn at lower prices, as it grows cotton, whereas Bangladesh depends mostly on imports.

The widely consumed 30-count yarn is sold at $3.30-$3.40 a kg in Bangladesh, whereas India can sell the same yarn at $3.10-$3.20 a kg in India. Moreover, demand for some garment items in the EU has declined due to the volatile global economic situation, sapping demand for yarn in the local market. The orders from the international buyers, especially for the knitwear items, are declining by the day due to the EU debt crisis.

Exporters said earlier they used to book orders up to March in the October-November period of a year. But this year they have their hands full till end December. The relaxation of the rules of origin by the EU for the least developed countries since January also played a negative role in the promotion of the spinning sub-sector. The garment makers prefer to use imported fabrics rather than buying them from the local millers as they can get zero-duty facility even for imported fabrics. As a result, the demand from the weavers also fell for the introduction of the single stage GSP facility.

Inadequate gas supply to the industrial units is a major obstacle to the production. There is no pressure for selling yarn in the market, as the knitters' demand for the item has not increased yet, said Razeeb Haider, managing director of Outpace Spinning Mills Ltd. "Still we have the unsold yarn stockpiled in our factories. We have reduced the production capacity of our factories as the demand has declined," said A Matin Chowdhury, managing director of Malek Spinning Mills Ltd.

The sector cannot enjoy the facility of the low-priced imported cotton, as it will take a few more months to arrive in the country, Chowdhury said. "The weavers should also enhance the efficiency of the factories, so that they can supply quality fabrics to the customers," said Rezaul Hasanat, chairman and managing director of Viyellatex Group. The orders for basic garment items have declined, but demand for high-end items from Bangladesh is increasing, Hasanat said.

“There is no significant improvement in sales of yarn, although the yarn stock seems to be in decline," said Jahangir Alamin, president of Bangladesh Textile Mills Association. The spinners have reduced imports of cotton with the reduction of production capacity in the factories, he said. The dull sales of yarn may prolong if the EU debt crisis continues further, he added.

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