Unsold yarns pile up for falling garment exports

Unsold yarn from mills in Bangladesh is piling up abnormally due to a 30% drop in work orders for apparel items from international clothing retailers and brands.

The amount of yarn stockpiles has already exceeded five lakh tons in the past two months, according to the Bangladesh Textile Mills Association (BTMA).

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Razeeb Haider, managing director of Outpace Spinning Mills, said the volume of unsold yarn with its mills had risen to 1,600 tonnes last week.

“The stock started to rise two months ago as demand for clothing fell.”

Before the latest slowdown, Haider’s mills had a yarn stock of 500 to 600 tons, which the contractor considers normal.

The accumulation of unsold yarns is worsening due to lower orders for garments from international buyers, said Md Masud Rana, managing director of Asia Composite Mills, which consumes 40,000 tonnes of cotton annually.

Mahin Group is also feeling the pinch of slowing exports.

“Yarn hoarding is taking place, not for the price factor but for the demand factor, as buyers delay orders due to higher inflationary pressure in European countries,” said Abdullah Al Mahmud Mahin, Chairman and Director general of the Mahin group.

Yarn consumption by export-oriented garment factories fell to almost five million kilograms a day from 12 million kilograms previously.

Similarly, yarn production at mills serving the domestic market has also fallen significantly amid a sharp drop in demand from consumers battling for record prices.

Spinners in Bangladesh are facing a double whammy in the yarn business.

On the one hand, they are operating their production units at 50% of their capacity due to a severe gas and electricity crisis. On the other hand, the volume of unsold threads increased.

Inventory would have increased further if millers could operate their operations at full capacity with adequate gas pressure, industry insiders say.

Due to the drop in sales, the primary textile sector, which has so far invested around 20 billion dollars, is seriously threatened.

In some cases, yarn sales have fallen by more than 50% in the past two months due to the economic crisis in major export destinations in Europe.

Currently, local spinners can supply 90 percent of raw materials to the knitwear industry and 40 percent to the woven industry, Bangladesh’s two main export segments.

In recent years, the demand for locally spun yarns and fabrics has increased among manufacturers, as domestic production has allowed them to reduce long lead times.

At least 30 additional days are required for garment exporters if shipping goods made from fabrics imported from China.

Although the country has a huge volume of yarn, some manufacturers are importing the textile raw material from other countries like India, which is hurting the local industry, according to a number of millers.

This led them to demand that the government take action to stop the import of yarn in order to protect domestic industries and foreign currency reserves.

Mohammad Ali Khokon, chairman of BTMA, said the primary textile sector faces a multi-pronged challenge from the Russian-Ukrainian war, rising inflation in Europe and the gas crisis in Bangladesh.

He demanded an additional 90 days for the payment of loans under the central bank’s Export Development Fund so that millers can withstand the impacts of unsold yarn.

Michael O. Stutler