One of the largest RMG producers in the world, Bangladesh is feeling the heat of draughts in major cotton producing countries like China, Europe, North America, Brazil and Africa. As per a Bloomberg report, cotton production in the US is set to fall 28 per cent, while Brazil is likely to see a drop of 27 per cent, production in India is also lower by considerable percentage. If cotton production in these countries indeed declines, it will have a severe impact on the RMG industry in Bangladesh, warns Monsoor Ahmed, Additional Director and CEO (In-Charge), Bangladesh Textile Mills Association (BTMA).

The association imports 10 to 11 per cent cotton from the US and 4 to 5 per cent from Brazil. It also imports yarn and fabrics from China. A decline in cotton production in these countries would therefore, have a negative impact on Bangladesh’s RMG production, he adds. Himel Khan, Director, Mithela Textile also predicts, the textile sector in Bangladesh may be deeply impacted by falling cotton production in the US, Brazil and other countries.

Walmart’s order cancellation to step up RMG losses in Bangladesh

Meanwhile, order cancellations by Bangladesh’s largest apparel importer, Walmart may also cause huge losses to the RMG sector, says Shahidullah Azim, Acting President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Walmart cancelled orders by 30 per cent and is deferring shipments of certain orders, he adds. Mohiuddin Rubel, Director, BGMEA anticipates, this would prove to be a big blow for the industry as already production costs have increased due to various reasons. As the situation worsens, exporters can no longer do anything except keep a keen eye on developments.

Inflation leads to 30% order drop

European Union’s statistical office, Eurostat, pegs the inflation rate in the Eurozone in July 2022 at around 8.9 per cent. It is likely to be higher at 9.8 per cent in EU and 10.1 per cent in the UK. Together, the EU and the UK account for over 60 per cent in the last fiscal year. The surge in inflation in the US to 8.5 per cent in July 2022 is resulting in a fall of purchase orders from these by 30 to 35 per cent, reflects Statista data. Drop in orders is leading to closing of many big factories in Bangladesh, adds Azim. In August, Bangladesh’s export earnings declined around $500 million due to fewer orders, delay in delivery and forced discounts.

Hike in fuel prices impact production costs

Production costs in Bangladesh have grown around 15 per cent due to a rise in fuel price and a 20 per cent rise in logistics costs for the manufacturing sector, explains Shovon Islam, Managing Director, Sparrow Group. A hike of 62 per cent in yarn price, 500 per cent in freight cost and 60 per cent in chemical cost have also impacted the Bangladesh apparel production sector, observes Rubel. Rubel points out for the past few months other factors that have hindered growth are: drought in cotton-producing countries, cancellation of orders, global inflation, Russia-Ukraine war, power shortage among others.