Euro Group has always been the trendsetter in providing total solution package to its customers in the field of Textile and Garments, ensuring value for price and in term of achieving the entire customer satisfaction. Euro Group also represents Truetzschler GmbH from Germany, which is specialized in the development and production of machines, installations and accessories for spinning preparation, the nonwovens and man-made fiber industry.
Recently in an interview Chairman of Euro group, Engr. ASM Haider shared his insights on Bangladesh spinning sector.
Textile Today: According to recent data of BTMA, yarn worth of BDT 10 billion was piled up in the warehouses. Why is Bangladesh spinning sector facing in this situation?
Engr. ASM Haider: This piling up situation was one month back and more or less cleared now. But the main concern is the yarn price still very low. Earlier the loss was around 50 cents per KG’s of yarn now the loss is around 35 cents due to the low demand of yarn. It has to be noted that there are many factors for that and we cannot point out just one single reason for that.
First of all, the overall situation of the world is very unstable economically and politically. We talk about Brexit, the trade war between China and the US and mass upsurge in key places worldwide like Hongkong, Barcelona, Lebanon, Paris, etc. A small spark is igniting a big fire everywhere. In consequence, the shaky investors have pulled their money out from the capital market and the purchasing power of consumers is low as well.
We could have brought fruit out of the US-China trade war, but the lion share of this apparel re-shoring has been taken by three countries; Vietnam, Indonesia, and Thailand. I would say it is a diplomatic failure of not being able to secure more from this reduced apparel export volume of China.
On top of that, our apparel export has been fallen down by 6.67% which was still sustainable but alarmingly we are losing the export of yarn.
Textile Today: Apparel makers say that the demand for yarn is slower as the work order inflows are less than the previous year. How the spinners are dealing with this critical situation?
Engr. ASM Haider: One of the frustrating reasons are big bulks of yarn and the finished fabrics That are coming through the customs and bond arrangements, and the local market has been flooded by them which is illegal. The government should be more vigilant towards these illegal infiltrations made by unfair business practices. This grave issue has been raised by the BTMA many times.
“If our demand is higher and we have to import more than we export, then why the stock is there? It is clear that there are infiltrations of undesired yarn in the market and that is why we are still importing. Quality and price are not an issue, because our quality is much better .”
Due to this, the back process will die one day if we do not support our spinners and it will also kill the value-addition for RMG. Sad but true, if that happens then in the future, we have to depend on the imported yarn from India, and for sure the RMG sector will face extinction because of unacceptable lead time, quality inconsistency, and price non-negotiability.
The extinction of RMG will be simply followed by the failure of banking, hotels, tourism, insurance and the non-bank financial sector. So we must act before its too late to support the back process industry.
Another point I would like to add is, a ‘panic sell’ is prevailing among the spinners right now. If a spinner today gets a price of $2.70, another spinner tries to snatch the order by selling at $2.65. So, the first one loses the order. In consequence, the next day the first spinning manufacturer sells at $2.60 in fear of losing the order again against such low demand and tries to get rid of his inventory. Due to this panic sale, we are killing prices among ourselves.
Another crucial thing is, why they are in a rush to panic sell?
Because the spinners are not getting enough support from the banking sector. For example, a mill has cotton stock costs 90 US cents and the international cotton price is 65 cents. If the spinner wants to buy the cotton at 65 cents to average down the price of the raw cotton stock at the mill, the bank will prevent the spinner to open an LC. Because banks are saying, first you sell your yarn and only then you can place a new order against your export proceed. So, they are bound to sell the yarn at whatever price they can get.
Secondly, the spinning sector needs support from the government also. Gas price has been increased by 40%! A 50000 spindles mill has to pay the extra gas bill of BDT 4 million per month. How a miller can afford this extra bill and that also against the rising overhead?
Thirdly, Bangladesh Bank, NBR always advises for a single-digit interest rate. But not a single bank has complied with this request of Bangladesh Bank and NBR. With the interest rate 12% and above, the spinners cannot go for new investments.
Some of the spinners are trying for foreign investment. But it is possible for only those who are 100% export-oriented. Because the procedure is also in USD and they can take a loan in USD. So, there is no currency risk for the miller. But it is in no way possible for the local spinners targeting for local consumption.
And if we see our competitor countries have devalued their local currency to stay afloat. Whereas we are still holding onto our exchange rate, which is a big demotivating factor for the exporters.
Textile Today: According to NBR, during the January-June period of the year, Bangladesh imported 602432 tons of yarn, while it exported (deemed export) 506342 tons, meaning imports are higher than exports. This also indicates that what we are producing is not meeting our local demand or we are not price competitive. What is your opinion?
Engr. ASM Haider: This is exactly what I have implied previously. If our demand is higher and we have to import more than we export, then why the stock is there?
It is clear that there are infiltrations of undesired yarn in the market from India, and that is why we are still importing. Quality and price are not an issue, because our quality is much better than India. Bangladesh spinners are mostly using first-class cotton imported from West Africa and we have the latest technology European machinery.
Textile Today: Bangladesh spinning sector is now able to supply 85% of yarn and fabric for the knitwear sector and 40% of woven fabric. How it can contribute more?
Engr. ASM Haider: Bangladesh spinning sector is not able to produce enough woven fabric due to two reasons.
To start a woven factory, an entrepreneur needs a lot of machinery. Like warping creel, the looms, sizing, finishing, etc. Also with high-interest rate investors are not going for this type of investment at the moment.
On the other hand, it is deemed as risky also. Why? Cause we do not have that many weaving experts. In most of the weaving mills who are doing okay, their technicians are either coming from Pakistan, or from abroad.
I would suggest BTMA should always have some form of training program for weaving managers or upcoming weaving engineers. At the same time, BTMA should create a common fund and send locals abroad if needed for training.
You see, this training of individuals is not possible privately – for example after training if the engineer joins to some other mills then it will not hurt anyone, as the training was provided under a common fund.
Textile Today: As you are a leading technology provider, please share your insight on how technology can help more the spinners to survive this tough situation?
Engr. ASM Haider: When the price is low then the spinners have to cut down their cost. They must work in every area where they can cut the cost of production. 70% cost of yarn comes from cotton. Basically, there are four major things:
- Cost of raw material
- Electricity cost
- Financial cost
- Overhead cost
Cost of raw material which holds the lion share of 70%. To reduce that cost, spinners should choose machinery which will allow them to use a slightly lower grade of raw cotton and arrive at the same yarn level at the output level. The machine should have that flexibility to give the spinners that cutting edge.
For example, Indian cotton generally has a trash level of 4-5%. So the machine should have enough cleaning points. Truetzschler machine from Germany has enough cleaning points in the blow room. Blow room is the only area where the high trash cotton content can be cleaned.
Truetzschler machinery is well equipped to deal with this type of situation and while cleaning the cotton it will generate a very high amount of neps. The only place the spinners can remove the neps is in the carding machine. The Truetzschler carding machine has the highest neps removal efficiency – 80% plus.
Considering this situation the spinners should not look at cheap machinery from China and India. Yes, the initial investment is on the higher side but spinners can save cost on 70% of yarn. The performance will remain the same for the whole life span of the machine.
On reducing the wastage of the raw cotton, Truetzschler has automatic waste control in all the machinery. Machinery is equipped with optical devices at all the waste extraction points, and this device can literally judge like a human eye – where the good fiber is getting lost or not – it will squeeze down the gap if good fibers get lost with waste. If the black waste comes out, it will open the point to not let the bad one mix with a good yarn. So, it will always optimize the waste quality as well as the quantity.
With Truetzschler machinery, nobody has to check anything. This artificial intelligence has been in place already and all are set automatically. Cameras are set in all the waste extraction points and can save a minimum of 0.5% of the waste. For example, 50000 spindles will produce 30 tons of yarn every day and it will save 150 KG yarn. In a year it will save 92000 USD.
Textile Today: Bangladesh spinning industry is mostly dependent on cotton, whereas our competitors are way ahead in synthetic and polyester yarn fiber. And Truetzschler is also specialized in providing these solutions, what is the market growth aspect in Bangladesh for these types of machinery?
Engr. ASM Haider: Bangladesh spinning sector is not ready for this. Because these are plants having minimum human interference and we automatically lose the advantage of our huge workforce. It is totally capital intensive and our cost of fund is too high. Also, we are yet to develop the technical know-how to run such plants. So, this investment is not viable.