Several internal as well as external factors have led to a fall in demand for yarn and are impeding the growth of the spinning sub-sector in Bangladesh, forcing the spinners in the country to curtail their production and operate at only 60 to 70 percent of their production capacity.
The major challenges confronting the spinning industry include invasion of low-cost yarn from China and India, Eurozone crisis, stockpiling of unsold yarn, gas outages and introduction of the relaxed EU rules of origin (RoO).
EU relaxing its RoO since January this year is a major external factor which has led to a fall in demand of yarn, as the garment manufacturers prefer using imported yarn and fabrics over domestic ones as now they even enjoy zero-duty facility for goods produced while using imported raw materials.
Secondly, owing to global financial turmoil, including the European debt crisis, demand for some variety of garments from EU has declined. Orders from global buyers, particularly in the knitwear segment, are experiencing a gradual fall, which too has led to a fall in domestic yarn demand.
Third, spinners currently hold stock of yarn that was spun from costly imported cotton. But now with a major drop in cotton prices globally, weavers and knitters are not willing to buy high-priced yarn, following which a huge quantity of yarn is lying unsold with the spinners.
With an aim to enhance demand the Government introduced some measures like incentives on export of garment items prepared from domestically spun yarn. However, the problems for the sector multiplied with entry of low-cost Indian yarn in the market, as while Bangladesh largely depends on imports, India has a comparative advantage as it produces cotton domestically, which allows it to sell yarn at low prices.
The 30-count yarn, which is under wide consumption, is sold at a price of US$ 3.30 to US$ 3.40 per kg in Bangladesh, while in India it is sold at around US$ 3.10 to US$ 3.20 per kg.
Fibre2fashion News Desk - India
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