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Garment accessory manufacturers take a hit as raw material prices rise steeply

Garment accessory and packaging manufacturers hit hard as raw material prices rise steeply. While the COVID-19 pandemic has put the overall apparel and textile and its sub-sectors under immense difficulties.

With the pandemic choking the global supply chain, prices of raw materials used by the backward linkage industry have skyrocketed in the international market. A sudden increase in demand following the complete restarting of manufacturing hubs in China and India after the COVID-led shutdown has caused a sudden hike in prices of necessary raw materials such as polymer, yarn, Kraft paper and chemicals reaching between 40% to 80%.

Garment-accessory-packaging-raw-material-prices-rise
Figure 1: With the pandemic choking the global supply chain, prices of raw materials used by the backward linkage industry have skyrocketed in the international market. 

Since last January, accessories and packaging raw material prices have started rising. Between, January to May, yarn prices increased to $3.5 from $2.5 per kg, polymer used to make poly bags and hangers has jumped to $1,600 from $960 per ton, and Kraft paper to $1,400 from $880 per ton.

While, the ink and chemicals prices increased by $9-$12 and $90 per kg from $7 and $55 respectively.

AKM Mustafa Selim, owner of SAMS Packaging, told a leading daily, “The Kraft paper we used to import at $800 per ton now costs $1,400. At the same time, banks are also not giving us additional loans. We are barely keeping our factory running to retain the workers.”

Accessories and packaging makers are now losing money due to this precarious situation.

The Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) said accessories and packaging factories are in the SME category, but maximum of them have not received loans from the Tk20,000 crore stimulus package announced by the government.

Locally produced garment accessories and packaging items meet 95% of the demand of the RMG industry.

When the first wave hit in March last year, the accessories and packaging factories had to shut down.

While the RMG export growth is regaining the accessories sector is unable to benefit due to a sharp rise in raw material prices.

Accessory owners say they are losing money by importing at a higher rate but not getting a fair price at home. Lack of enough capital is also forcing them to import lesser amounts of the now costlier raw materials and lose production.

Garment-accessory-packaging-raw-material-prices-rise
Figure 2: Garment accessory and packaging manufacturers hit hard as raw material prices rise steeply.

Abdul Quader Khan, President, BGAPMEA said, “Freight costs have gone up too. But we are not getting increased prices. So, factories are struggling for survival.”

“Prices of raw materials have gone up steeply, but RMG exporters are not ready to pay the extra for accessories. We are forced to sell products at lower pre-pandemic prices,” Al Shahriar Ahmed, General Secretary of the Bangladesh Apparel Youth Leaders Association said to a local media.

“However, apparel exporters are reluctant to increase prices for packaging items they buy from us. We were forced to reduce production to curtail losses,” Ahmed added.

“We do not have enough capital either. Earlier, I could import 100 tons of raw materials with my full capital, but now I can get about half. Banks are also not giving us additional loans. We are barely keeping our factory running to retain the workers,” he added.

Abdul Quader Khan demanded that the government offer a 1% cash incentive against exports and reduce corporate tax to 12% for the garment accessories sector.

There are about 1,800 factories producing garment accessories and packaging items in the country. They supply 40 types of products, such as buttons, plastic hangers, polybags, labels, zippers, tags, tapes, thread, ribbon, rivets, laces, hooks, transfer film, paper, and ink, to the RMG industry, according to industry sources.

The accessories and packaging manufacturing industry’s investment now stands at around Tk35,000 crore. About six lakh workers are engaged in the industry.

Industry owners say they are losing money by importing at a higher rate but not getting a fair price at home. Lack of enough capital is also forcing them to import lesser amounts of the now costlier raw materials and lose production.

“The kraft paper we used to import at $800 per tonne now costs $1,400. But apparel exporters are reluctant to increase prices for packaging items they buy from us. We were forced to reduce production to minimise losses,” AKM Mustafa Selim, owner of SAMS Packaging, told The Business Standard.

“We do not have enough capital either. Earlier, I could import 100 tonnes of raw materials with my full capital, but now I can get about half. Banks are also not giving us additional loans. We are barely keeping our factory running to retain the workers,” he added.

Nevertheless, the accessories manufacturers are not getting higher prices for their products as manufacturers are reeling from less work orders and price cuts due to an apparel demand drop in the global market, industry insiders say.

While if the backward linkage shrinks, the apparel sector will have to depend on imports for huge quantities of accessories. There is also a risk of an increase in lead time as well as additional costs. This will negatively impact garment exports as well.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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