Garment exporters have been feeling the sting of an unexpected surge in manufacturing costs, fueled by increases in yarn pricing and freight charges in the aftermath of a recovery in exports during Covid-19.
According to entrepreneurs, the cost per unit has risen by up to 30% from a year earlier due to Bangladesh’s reliance on imported goods for the production of readymade clothing (RMG).
In international futures markets, cotton prices have risen to 93 cents a pound. Even in January and March, prices varied between 70 cents and 74 cents per pound.
The widely consumed 30 carded cotton-made yarn was fixed at $4.20 per kilogramme (kg) in consultation with garment manufacturers and spinners. It was decided that spinners would increase yarn prices if cotton prices crossed $1 per pound in international markets and go for a reduction if it went below 85 cents.
Growth in demand for yarn and other raw materials has led to a surge in freight charges and yarn prices. The cost of production increased mainly over the last one-and-a-half years when freight charges started escalating abnormally in international markets. Bangladesh imports more than $15 billion worth of industrial raw materials, particularly for garment and textile industries, from China in the year.
Cost per unit of production at Bangladeshi garment factories has risen by 30 per cent this year, mainly due to increase in yarn prices and freight charges, say exporters. Most suppliers have been surviving through exporting higher volumes of goods, not through better values, says Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association.