Bangladesh: Cotton price rise impacts RMG exports
Cotton prices in the global market hit a high of over a decade in the wake of the Russo-Ukraine war, unusual increase in freight and drought in the US, which will increase the production cost for readymade garment (RMG) manufacturers in Bangladesh. Which is affecting their profitability.
Even before the Russian-Ukraine war, the price of major textile raw materials had risen to increased demand in the international market, following the reopening of economies following the pandemic-led lockdown.
Due to drought in some cotton-growing regions in the US, rising petroleum prices in global markets and high-volume purchases of cotton by China raised the price of white fiber by up to 9.09 percent last month.
As a result, the cost of production for textile manufacturers and exporters will further increase as Bangladesh is completely dependent on imported cotton to feed its main export income zone.
Local producers can supply less than 2 per cent of the 9 million bales of cotton consumed annually in the country, forcing the country to spend nearly $3 billion on raw material imports for the growing garment industry. Some 480 pounds, or 218 kilograms, form a bale.
Importers and mill owners say that if the war continues, the price of cotton will rise further. This will eventually increase the price of the yarn in local markets, increasing the cost of production for garment manufacturing.
"Sometimes, spinners have increased the price by $1 per kg in recent months. "
Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, says the high price of cotton will affect the profits of textile exporters.
International retailers and brands in the apparel business at large are not bearing the extra cost of production. He said that local exporters are bearing the burden of this.
Cotton prices rose 51% year-on-year in February. Rahman said the price of white fibre has increased further and this means further pressure on the profits of garment exporters.
The fresh cotton price hike is expected to impact exports of garment goods from Bangladesh at a time when the industry is recovering from the dire repercussions of COVID-19.
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