RMGs secure strong orders, defying odds over last six months

Infograph: TBS

Bangladesh's readymade garment (RMG) industry remains resilient, securing steady export orders over the last six months through January. Most buyers are ramping up purchases amid strong retail demand in key markets such as the US and EU. The shift of orders from China, driven by the US government's plan to impose tariffs on Chinese goods, has further helped the sector.

Industry leaders anticipate over 10% growth in 2025 based on current order projections. This surge is hardly surprising, given that Bangladeshi factories specialise in outerwear production, both knit and woven, which are in high demand. What is unexpected, however, is the steady inflow of orders despite concerns over political instability and fears of unrest following the collapse of the Sheikh Hasina regime in a student-led uprising on 5 August.

Resilience is key but concerns remain

"If a day is lost due to unrest or any other reason, we work at night or on Fridays. We are very resilient," said AKM Shaheed Reza, chairman of Reza Group, which supplies fashion products to US and European markets. He also noted that buyers' representatives—mostly Chinese, Indian, and Sri Lankan—are well-versed in the Bangladesh market and remain confident about sourcing from the country.

Despite the positive outlook, exporters remain wary of potential risks, ranging from energy supply disruptions to rising business costs, policy inconsistencies, and law-and-order concerns.

Some large buyers have opted against placing orders with factories in the Ashulia zone, citing recent law-and-order issues. Furthermore, these factories are struggling with gas shortages, which have hampered production capacity.

Mahmud Hassan Khan Babu, managing director of Rising Group, told The Business Standard that his company has secured full-capacity orders until June from buyers who typically provide long-term projections. However, those catering to the fast fashion segment have only confirmed orders until April.

"The overall order situation in the industry is not bad," he said, although rising production costs are squeezing profit margins.

He pointed out that the absence of clear policy direction poses a challenge. "Some buyers place orders six months in advance. If the government introduces policies that hike utility bills or wages during that period, it could significantly impact businesses," he explained.

Gas shortages are another pressing concern, particularly for vertically integrated factories that rely on a steady supply. "If the government ensures an adequate gas supply, factories might not turn to imported yarn and fabrics. Moreover, local value addition in the RMG sector will increase," he added.

Shams Mahmud, managing director of Shasha Denims, said his company has secured orders for the next four months, although not all factories are in the same position.

"Most factories are seeing good orders, but those in Ashulia are facing significant challenges," he said, pointing to gas supply shortages and financial struggles affecting many manufacturers in the area.

Sheikh HM Mustafiz, CEO of Cute Dress Industries, reported full-capacity orders for the next four months, with strong inquiries extending beyond June.

"Our projection for 2025 is about 15% growth," he said, noting that the company exported $7.3 million worth of garments last year.

Giant Group Director SM Majedur Rahim said the company is operating at full capacity and has confirmed full-capacity order projections until July. 

He noted that August, being the lean season, may experience a slight slowdown, but from September onwards, orders are expected to return to full capacity, as forecasted by buyers. 

Last year, the group achieved export revenues of $75 million, reflecting a growth of over 23%, driven in part by additional orders from US buyers. 

US companies accounted for over 60% of the group's production capacity. 

"Last year was an exceptional business year for the company," he added, expressing optimism that this year they expect a 10% growth.

Ashulia factories trying to survive

Meanwhile in Ashulia, frequent labour unrest and consequent production disruptions, have put the industry-dense area in the crosshairs of buyers. Mirza Shams Mahmud Shakti, CEO of SM Sourcing, said, "Some buyers have already developed a map assessing the risks in this zone to relocate their orders away from the Ashulia zone."

Despite having a factory in the Ashulia zone, the company is now operating at full capacity as it produces promotional products for discount retailers.

"Working with discount retailers is challenging as they try to reduce prices every year, but exporters must adjust by improving production efficiency," Shams added.

He expressed optimism about reaching $100 million in exports this year, as his company has booked full-capacity orders until June.

Considering the overall business trend, he noted that if law and order in the industrial zone stabilises, businesses across the sector could see growth.

Shovon Islam, managing director of Sparrow Group, said the group has booked full capacity orders for the next six months. Some orders are also shifted from local factories to tackle additional workload; the group has started another new unit at the end of last year, he added.

According to BGMEA data, over a hundred factories have started operations in 2024, while the same number of factories have closed operations due to the financial crisis.

Textile mills running at half capacity

The Bangladesh Textile Mills Association (BTMA) President Showkat Aziz Russell said most of the textile and spinning mills are running at 50% due to gas shortages, while they have the capacity to meet 100% of the demand of knitwear garment and over 50% of woven garment factories.

The energy crisis also creates an opportunity for the Indian textile industry, as they have experienced 40% growth in exports to Bangladesh in 2024, which also helps them to create about 1 lakh jobs, he added.

He said while Bangladesh's textile industry is facing difficulties, India's textile exports to Bangladesh have experienced significant growth.

"It is absurd that policies are being implemented against local industries and job creation," he added. "We believe the interim government will take policy decisions to protect domestic industries."

"The government has supplied gas to fertiliser factories, which could be imported [for garments also] considering the cost-benefits".

On the other hand, due to currency devaluation, banks are not able to support millers as their working capital limit is shrinking. If the government would not provide financial support, the rest of the companies would not be able to survive in the days to come.

Hope for the best solution

Faruque Hassan, former president of the Bangladesh Garment Manufacturers and Exporters Association, told The Business Standard that despite challenges such as gas and electricity shortages, labour unrest, and political transitions, the industry should take satisfaction in sustaining modest growth.

He expressed optimism for 2025, citing rising demand from Western markets, easing inflation, and lower interest rates, while emphasising Bangladesh's potential to benefit from the China-US trade war, provided internal factors like political stability improve.

Echoing Faruque's comments, Abdullah Hil Rakib, Managing Director of Team Group, agreed and highlighted the opportunity for Bangladesh to expand in the global market as businesses shift from China.

However, Rakib criticised the lack of government support, stating, "The government has shown no intention of aligning policies with the industry's needs." He urged a review of policies based on IMF recommendations, warning that without reforms, the industry could stagnate. Drawing inspiration from Singapore's growth without adhering to IMF prescriptions, Rakib suggested that Bangladesh explore alternative strategies.

BKMEA President Mohammad Hatem noted that while some orders have increased in the past couple of months, exporters continue to face challenges due to rising production costs and stagnant prices. Adequate utility supplies also remain a hurdle for the industry in meeting buyers' lead times.

He added that the law-and-order situation has yet to normalise, which is crucial for regaining buyers' confidence.

According to Wazir Advisors Pvt. Ltd, an international market research firm, the global apparel trade and retail update for November 2024 shows that apparel imports continued to grow in the US and EU, remained stable in the UK, and declined in Japan.

US apparel store sales in December 2024 are estimated to be 6% higher than in December 2023. For the calendar year 2024, sales were 1% higher than in 2023.

US home furnishing store sales in December 2024 are estimated to be 10% higher than in December 2023. For the calendar year 2024, sales were 2% higher than in 2023.