Costly yarn throws weaving industry off balance

A steep rise in prices of yarns over the past three months – amid rising raw material prices in the international market and increasing transportation costs because of fuel price hikes – has put weavers in the country in a tight spot.

Struggling to tide over the escalating cost of the key raw material, many weaving mills have already cut down the production drastically. If the yarn market remains volatile, many weaving factories will be forced to shutter, industry insiders say.  

Md Nannu Ali Khan, secretary to the Chawla Textile Industry Owners' Association of Narsingdi district – home to the largest number of weaving mills in the country, said 70% of the capacity of the country's weaving mills now remains unused as yarn prices have gone up by more than 50% in three months. Besides, 90% of the factories that are in operation are running only one shift a day, he added.

On the other hand, the abnormal rise in yarn prices on top of losses induced by the coronavirus pandemic and flooding is pushing away around eight lakh weavers in Sirajganj, Pabna, Tangail, and Kushtia – the major garment-manufacturing hub for the domestic market – from their age-old profession.

Many weaving mills have reportedly stopped production because of mounting losses as they could not hike the prices of clothes in line with the rise in yarn prices.

The Bangladesh Textile Mills Association (BTMA) says the annual size of the domestic garment market in the country is about Tk70,000 crore, and local weaving mills meet 70% of this huge demand.

The main sources for local apparel items such as three-pieces, sarees, lungis, panjabis, school dresses, shirts, and pants are Madhabadee and Baburhat in Narsingdi district, Keraniganj and Islampur in Dhaka, Narayanganj, Pabna, Sirajganj, and Kushtia.

70% capacity of weaving mills unused

The main centers of the weaving industry are Mabhabdee and Baburhat in Narsingdi, and Araihazar in Narayanganj.

There are about 300 weaving mills in the Chawla area of ​​Narsingdi, which employ about 24,000 workers directly. Many entrepreneurs here have resorted to reducing or shutting down production due to the recent steep increase in the prices of raw yarn.

One such entrepreneur is Md Noyon Mia, owner of Sanzita Textile. Even though he resumed production in his factory following an improvement of the Covid situation, he is using only half of the factory's capacity and that too only on the night shift.

Noyon said like his one, 90% of the weaving mills in the area now stay closed during the day and remain operational on the night shift at 50%-60% of capacity.

Explaining the reason for this, he said, "Even nine months ago, we used to buy 40 count yarn at Tk110 to Tk115 per pound but the price has gone up to Tk190 to Tk200 now. On the other hand, we used to sell clothes at Tk24 per yard nine months ago and currently we can sell clothes at a maximum of Tk31 per yard against the production cost of around Tk34."

Md Nannu Ali Khan, another industrialist of the area, said, "I have two factories with 100 power looms. One of these is completely out of operation now while the other is open at 50% capacity."

The price of 100 power looms is around Tk1 crore. When the prices of other machines, installation costs of the machinery and electric lines, the working capital and other expenses are included, the overall investment in such a factory stands at around Tk2.5 crore, he calculated. "But we are having to keep the factory closed and count losses due to a lack of demand for clothes."

Weaving mill owners have complained that local spinning mill owners have increased the prices of yarn at an unusual rate – much higher than the rate of cotton price hike in the international market – in the hope of making lofty profits. The prevalence of middlemen has pushed the prices further up.

The spinning mill owners, however, rebuffed this allegation. They said that yarns have become this costlier as the price of cotton has gone up abnormally high in the international market.

BTMA Vice President Abdullah Al Mamun, however, has endorsed the claim that about 70% of the country's weaving mills are now closed. "Usually, weaving mills cannot use their full capacity in this season of the year which is somewhat off-peak. But the current situation is unusual."

According to BTMA sources, the organisation is working to address the crisis. To this end, a standing committee has been formed, headed by former BTMA director Khorshed Alam.

Khorshed Alam told The Business Standard that many spinning mills have already agreed to sell yarn at the mill rate while some have already started selling at the rate.

Keraniganj factory hub on the verge of closing, again

Clothing factories set up in Keraniganj and areas by the River Buriganga in Dhaka cater for nearly 70% of the demand of garments including shirts, pants, T-shirts, panjabi and three-pieces across the country. Factory owners in Keraniganj, known as a hub for producing clothes for the limited-income people, are in dire straits due to the rising yarn prices.

According to the local business community, at least 50% of traders in the area have lost their capital due to missing out on four Eid festivals amid the pandemic. Mentioning that some have completely shut down businesses, they said those who have reopened factories are also unable to continue production because of the increase in yarn prices.

Saiful Islam, owner of Abir Garments, told TBS that about 10,000 cloth traders and more than 5,000 factory owners in the area are now in a crisis. "Many have gone bankrupt. Over 20% owners did not open their factories after the Covid-induced closure."

Earlier, around four lakh people worked in the clothing factories in the area but now the number has come down to two to two and a half lakh.

Handloom weavers are hardest hit

Pabna, Sirajganj and Tangail have the highest number of artisans producing handmade garments in the country. In these three districts, about seven lakh people are involved in the production of local garments including sarees, lungis and towels. However, 35%-40% of the weavers could not return to production due to the pandemic, flooding and rising yarn prices.

Industry insiders have said some of the workers who used to work in spinning yarns, designing clothes, making sarees, lungis and towels have already switched their profession as they had been unemployed for a long time. As a result, there is a crisis of artisans.

Fazlur Rahman Talukder, president of Sirajganj Handloom and Powerloom Owners' Association, said weavers could not sell sarees worth lakhs of taka as markets were closed for a long time last year due to the pandemic. "Before recovering the losses induced by Covid, they were affected by the flood. Many lost their capital and became broke. And many of those who have resumed production after arranging capital by borrowing from others are not able to keep their factories in operation as prices of yarn and other materials needed for making sarees have gone up."

High prices lead to poor sales

All gray clothes produced across the Narsingdi district goes to Madhabdee Bazar. While finished clothes are sold at Baburhat Bazar. Wholesalers across the country mainly buy clothes from these two markets.

While on a visit to the seven-decade-old Madhabdee Bazar, TBS found that buyer footfall was much less compared with the usual time.

Traders said their sales declined because of an increase in prices of clothes.

Like those in Narsingdi, local clothing markets set up in Sirajganj, Pabna and Tangail districts centring the weaving villages are also going through a lean phase in sales.

There are about 5,000 wholesale shops of sarees at Koratia Haat in Tangail. The market sees a turnover of about Tk500 crore every haat day during normal time, but the figure is much lower now.

Mohammad Habib, a shop owner in the market, said, "A product that cost Tk300 previously now costs Tk450. We are finding it difficult to make buyers understand that the prices of yarn have gone up. As a result, people are not buying. Sales also have come down to less than half the normal time."