Gas price hike and demand fall affected the business

Home textile was one of the major export items that reached the $1.0-billion mark, last year because of higher demand from the western consumers for the item at competitive prices after the recovery of the global supply chain from the severe fallouts of Covid-19.

The shipment of widely consumed home textiles like bed sheets, covers of the sofas, and seat covers was $1.09 billion in the fiscal 2022-23, registering a 32.47 percent fall from $1.62 billion, according to data from the Export Promotion Bureau (EPB).

In fiscal 2020-21, the amount from the shipment of home textiles from Bangladesh was $1.13 billion, the EPB data said.

The fall of the home textile continued also in the first two months of the current fiscal year in July-August.

The home textile export declined significantly at 53.40 percent year on year to reach at $125.14 million which was $268.52 million in July-August period of the last fiscal year, the EPB data also said.

The data analysis shows that the export of home textile continuously falling from the country although the sector showed its very promising in recent years and reached to $1.0 billion mark even in crisis amid the severe fallouts of the Covid-19, Russia-Ukraine war and high inflationary pressure.

The current trend of shipment of the home textile indicates that the earning from the home textile shipment may not reach even the $1.0 billion mark at the end of the current fiscal year.

Reasons for fall in shipment of home textile

Primarily, it is said that the demand for the home textile fell globally because of the high inflationary pressure stemmed from the severe fallouts of the Covid-19 and Russia Ukraine war that started from February 24 in 2022. Because of inflationary pressure, the western consumers are buying less of fashion items and household items like home textile as they have to spend a major portion of their income for basic food and essential commodities. And the home textile is fourth or fifth demanded items among the consumers and the home textile, especially the bed sheets is not a year round buying items like clothing items.

Secondly, the cost of production in Bangladesh increased a lot, especially after the February of this year when the gas price was almost doubled. But the home textile prices are negotiated for twice in a year as this item does not change like fast fashion. The local home textile suppliers negotiated the prices of the items earlier but the gas price was increased later. And the home textile makers were not given the additional prices by the international retailers and brands. So the local manufacturers did not take new work orders from their buyers and following such move the production fell a lot in the domestic markets. And this is the main reason for export fall of home textile from Bangladesh.

In home textile segment Pakistan is in better position than Bangladesh as this country has its own cotton for which Pakistan is in advantageous position. As a result, the Pakistani manufacturers can supply the home textile at competitive prices. But Bangladesh cannot negotiate the prices of home textile at lower prices as Bangladesh does not produce cotton and needs to import almost entire demand of cotton. The local growers can supply less than two percent of required cotton. Home textile especially for the bed sheets need a lot of yarn. So much of the work orders also shifted from Bangladesh to Pakistan particularly for bed sheet work orders.

The dollar shortage and currency devaluation are other causes. For instance, before gas price hike in February this year, the local home textile makers were selling the home textile items at three percent profit but after the gas price hike the home textile makers are selling the items at five percent below production cost for which they cannot afford the losses anymore and they are not taking any new work orders from the buyers as they were losing money.

For the dollar shortage the manufacturers cannot import cotton timely. But at the same time the spinners increased the prices of yarn in the local markets for which the production costs gone high again. As a result, some of the mills did not go for production. Also because they thought they might not make a profit producing the items from expensive cotton yarn.

The international retailers and brands placed nearly 45 percent fewer work orders in this year because the local manufactures did not show interest to book new work orders. The inflation pressure is still on in the western countries and the dollar shortage is still in the banking sector, also for which the export of home textile is declining. Until June next year such a downward trend in home textile may continue in the country.

The old stock of unsold inventories in the western stores is another problem. The international retailers and brands are saying that they will place work orders in bulk quantity in the mills once the old stock is finished. But the old stock is yet to be finished. Because the demand for the new products is not increasing as the consumers are buying less now. However, the retailers are saying that in the upcoming Christmas the sales may pick up as the severe impacts of the Covid 19 and Russia Ukraine war is easing gradually. The prices of food items are also coming down.

What the industry insiders say

The industry insiders are saying that a dull season is going on for the home textile as the demand fell in the international markets. The cost of production went up significantly not only for gas price hike but also for others factors like dyes chemical costs, yarn price, transportation and fuel costs. So the prices of home textiles May readjusted in the international markets soon and it is expected that the home textile market may be restored by June next year. Mohammad Khorshed Alam, Chairman of Little Group, a yarn supplier said the cost of production went up because of gas price hike and the yarn price also rose because of high import cost of cotton. The local suppliers cannot compete with their peer countries with the cost of production, he said adding the some of the manufacturers stopped production now as they are watching the market situation. So in near future like from June next year the market may rebound, he said.

M Shahadat Hossain Sohel, Managing Director of Towel Tex Limited and chairman of Bangladesh Terry Towel & Linen Manufacturers & Exporters Association (BTTLMEA) said the cost of yarn increased by more than 45 cents per kilogram (kg) because of gas price hike in February but the buyers are not increasing the prices for the finished goods.

The demand fell in the international markets and the buyers are not placing fresh work orders like earlier in bulk quantity. The competition is high in lower quantity of work orders from the buyers. Moreover, the yarn price is also high in the markets, he said.

Mohammad Ali Khokon, President of Bangladesh Textile Mills Association (BTMA) also echoed the views of Alam and Sohel. Khokon also said the demand for home textile fell in the international markets, because home textile is not an item like fast fashion. For example, many families run the whole year with only a bed sheet. So buying patter is slow in case of home textile. Also the cost of production has gone high and the local manufacturers cannot match with price with the production cost, he said.

The way forward

Since a global volatile economic situation is going on the demand for many things fell. In such a situation the government can offer subsidy in gas price so the manufacturers can get a boost in rising cost of production.

The government should supply the gas with adequate pressure so the manufacturers can continue the production in full capacity to make their business more competitive. This is not a good time for making profit but to continue and maintaining the business with the buyers. The market will rebound soon then the profit may be made.

Gas supply with adequate pressure should be ensured so that the millers can continue the production for getting buyers and business. The efficiency in supply chain should be improved so the high cost of production in the supply chain is not increased and felt.

New markets, particularly in Asian markets such as India, Japan, Korea, Indonesia, Malaysia and Russian markets should be explored so the demand rises now. Middle Eastern countries also may be explored considering a difficult time.

The global supply chain is volatile now. The government should inspire so the local manufacturers can invest more in home textile and continue their business. Because the garment is a major driver of economy.