The yet to recover apparel business and fresh lockdowns in EU and US has led to a 40 per cent increase in Bangladesh’ yarn prices, says Md Fazlul Hoque, Managing Director, Plummy Fashions. As per Textile Today, prices are expected to stabilize in coming months with an increase in production. Demand is likely to rebound on recovery from the pandemic leading to a decline in cotton stocks, says an ICRA report. However, absolute cotton stocks, as well as cotton stock-to-use ratio, are expected to remain high.
The rise in local yarn prices can be attributed to growing international cotton prices that also affected Bangladesh’s garment shipments, especially of knitwear, during the ongoing pandemic, says Monsoor Ahmed, Secretary, Bangladesh Textile Mills Association (BTMA).
Yarn production gathers momentum
Another reason for the rise in yarn price was an increase in transport costs to cotton mills which adds to importer’s costs. The rise in cotton prices in international markets could be attributed to increased imports by China, the largest consumer worldwide. This year, China aims to import an additional five lakh bales to take the total to 1,000 lakh bales to tame its local market.
Despite being major cotton producers, China and Pakistan have increased their import targets as the price of cotton manufactured in China is high. On the other hand, Pakistan does not produce the required quantity, hence it plans to import an additional four lakh bales, indicates United States Department of Agriculture (USDA) report. However, Bangladesh may reduce its import by five lakh bales in the cotton marketing year (August to July) of 2020-21 as cotton prices now exceed pre-pandemic levels for factors including a recovery in use by mills, says the USDA report.
The ICRA report shows, cotton yarn production increased 4 per cent between September to October 2020 and 35 per cent in the seven months of current financial year. As per Ashwin Chandra, Chairman, SIMA, production has picked up and is expected to continue rising in the next two-three months, stabilizing prices.
Mills reopening cool off prices
The reopening of spinning mills is also expected to cool off increased prices as all old stock is expected to be used. Shahid Alam, Vice-Chairman of Shah Fatehullah Textile Mills and Jalal Ahmed Spinning Mills, says, over the last two months, old stock has been reducing gradually and demand for yarn was improving in local market, though it is yet to reach pre-pandemic levels. The exorbitant rise in yarn prices is affecting the handloom sector. In the last 3-4 months, cotton yarn and artificial yarn prices have surged 50-60 per cent and currently prices are 20-30 per cent higher than in the pre-COVID-19 era.