Supply-side shortage of cotton and another spell of high-price in the international market after July might lead to a catastrophe in the country's primary textile and clothing industry, according to industry insiders. Reserve from last December’s harvest not being able to meet the global demand is behind the price rise apprehensions, they said.
According to the USDA (United States Department of Agriculture), the global demand for cotton outstripped production by 1.3m bales (each bale comprises 480 pounds) in the marketing year to July 2011. In USA only, the import of readymade garments increased by 30.30 per cent this year which clearly indicates a growth in demand for cotton.
Talking to The Independent, president of Bangladesh Textile Mills Association (BTMA) Jahangir Alamin said the supply-side shortage has been resulted from India's ban on cotton export while in USA, the flood in Mississippi and drought in Texas caused production damage.
“Though cotton prices in the international market remain stable at between US $1.80 and 1.85 per pound (0.45 kg), I don't know where the price would go in the coming months, when the current reserve finishes," Jahangir said.
He said cotton prices had started to rise at the end of 2010 and reached a record high of $2.56 a pound (0.45 kg) in mid-February 2011 due to a supply crunch.
Cotton was traded between 40 and 80 cents for most of the period from 2000 to May 2010, when supplies were adequate, Jahangir added. Prices are still high in the international market compared to previous prices, he said.
Bangladesh largely depends on import of cotton for its primary textile and fast-growing readymade garment (RMG) industries, which have become the country's major export earning sector, noted Jahangir. "Procuring cotton from the international market will be difficult in the coming months as there are many big competitors in the global market,” he remarked. The country usually imports cotton from CIS (Commonwealth Independent States) and African countries, USA and India, Jahangir said.
He added that Bangladesh’s annual demand for cotton is around 55 lakh bales, worth $4.75 billion.
The domestic production is only 48,000 bales a year, which is not enough.
Jahangir said the demand for cotton would grow in the next fiscal, as the country's textile and readymade garment (RMG) industries are growing fast to grab the RMG export market.
Meanwhile, the president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Shafiul Islam Mohiuddin, said physical availability of cotton has already become rare in the international market and price-hike is a matter of time now.
He said cotton price volatility in the international market posed a lot of problems to primary textiles and RMG exports, due to an increase in the cost of production and unavailability of fabrics and yarn that started in mid-June 2010 and continued for several months.
Mohiuddin said Bangladesh's textile and RMG sectors need strategic support from the government so that the situation can be tackled without losing competitiveness in the international market.
"We need yarn and fabric at affordable prices as the cost of production has increased due to nagging gas and electricity crisis, interest rate hike, inefficient port delivery and increase in workers’ wages," Mohiuddin said.
He noted that the production cost is going up due to a surge in capital investment through borrowings from bank.
He said the governments of Pakistan and India have provided strategic supports on cotton usage to their respective textile and clothing industries. The governments' supports include raising price for cotton export and justified price for use of cotton by domestic industries, Mohiuddin added.
"As result, cotton export from Pakistan declined by 32.53 per cent during April 2011, which clearly indicates a high growth in the country's end product (fabric and readymade garment) export," he said.
Growth in RMG export in India was recorded this year at a 15 per cent high over the previous year, while at the same time, Pakistan's RMG export in April rose by 36.62 per cent.
"Policy support from the government in the next budget is essential for the country's textile and clothing industries to continue to increase exports and contribute to economy by widening the scope of employment and development," he said.
Meanwhile, BTMA vice-president Ahmed Ali said the latest amendment by EU (European Union) to Rules of Origin under the Generalised System of Preference (GSP) has put the local primary textile at a risk, as local garment exporters can now buy yarn and fabrics from outside the country.
He said the country's knitting sector has met 100 per cent of its demand for yarn from the local primary textile sector, while demand from the woven sector is met by 30-40 per cent.
Ali said investment in the country's local textile mills has already risen to around Tk. 30,000 crore and the expected growth in this sector cannot be achieved without government support.
According to the USDA (United States Department of Agriculture), the global demand for cotton outstripped production by 1.3m bales (each bale comprises 480 pounds) in the marketing year to July 2011. In USA only, the import of readymade garments increased by 30.30 per cent this year which clearly indicates a growth in demand for cotton.
Talking to The Independent, president of Bangladesh Textile Mills Association (BTMA) Jahangir Alamin said the supply-side shortage has been resulted from India's ban on cotton export while in USA, the flood in Mississippi and drought in Texas caused production damage.
“Though cotton prices in the international market remain stable at between US $1.80 and 1.85 per pound (0.45 kg), I don't know where the price would go in the coming months, when the current reserve finishes," Jahangir said.
He said cotton prices had started to rise at the end of 2010 and reached a record high of $2.56 a pound (0.45 kg) in mid-February 2011 due to a supply crunch.
Cotton was traded between 40 and 80 cents for most of the period from 2000 to May 2010, when supplies were adequate, Jahangir added. Prices are still high in the international market compared to previous prices, he said.
Bangladesh largely depends on import of cotton for its primary textile and fast-growing readymade garment (RMG) industries, which have become the country's major export earning sector, noted Jahangir. "Procuring cotton from the international market will be difficult in the coming months as there are many big competitors in the global market,” he remarked. The country usually imports cotton from CIS (Commonwealth Independent States) and African countries, USA and India, Jahangir said.
He added that Bangladesh’s annual demand for cotton is around 55 lakh bales, worth $4.75 billion.
The domestic production is only 48,000 bales a year, which is not enough.
Jahangir said the demand for cotton would grow in the next fiscal, as the country's textile and readymade garment (RMG) industries are growing fast to grab the RMG export market.
Meanwhile, the president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Shafiul Islam Mohiuddin, said physical availability of cotton has already become rare in the international market and price-hike is a matter of time now.
He said cotton price volatility in the international market posed a lot of problems to primary textiles and RMG exports, due to an increase in the cost of production and unavailability of fabrics and yarn that started in mid-June 2010 and continued for several months.
Mohiuddin said Bangladesh's textile and RMG sectors need strategic support from the government so that the situation can be tackled without losing competitiveness in the international market.
"We need yarn and fabric at affordable prices as the cost of production has increased due to nagging gas and electricity crisis, interest rate hike, inefficient port delivery and increase in workers’ wages," Mohiuddin said.
He noted that the production cost is going up due to a surge in capital investment through borrowings from bank.
He said the governments of Pakistan and India have provided strategic supports on cotton usage to their respective textile and clothing industries. The governments' supports include raising price for cotton export and justified price for use of cotton by domestic industries, Mohiuddin added.
"As result, cotton export from Pakistan declined by 32.53 per cent during April 2011, which clearly indicates a high growth in the country's end product (fabric and readymade garment) export," he said.
Growth in RMG export in India was recorded this year at a 15 per cent high over the previous year, while at the same time, Pakistan's RMG export in April rose by 36.62 per cent.
"Policy support from the government in the next budget is essential for the country's textile and clothing industries to continue to increase exports and contribute to economy by widening the scope of employment and development," he said.
Meanwhile, BTMA vice-president Ahmed Ali said the latest amendment by EU (European Union) to Rules of Origin under the Generalised System of Preference (GSP) has put the local primary textile at a risk, as local garment exporters can now buy yarn and fabrics from outside the country.
He said the country's knitting sector has met 100 per cent of its demand for yarn from the local primary textile sector, while demand from the woven sector is met by 30-40 per cent.
Ali said investment in the country's local textile mills has already risen to around Tk. 30,000 crore and the expected growth in this sector cannot be achieved without government support.
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