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Yarn sales slump on demand drop

Refayet Ullah Mirdha
Yarn sales in the local market dropped significantly mainly due to depreciation of the Indian currency against the US dollar and a slump in demand for apparel items on international market, said spinning millers.
The spinning mill owners in Dhaka said they stockpiled yam for four months up to December as the buyers have now the alternative cheaper Indian market for purchasingyam.
"Nowadays most of the local fabrics and knitwear manufacturers import yarn from India as recently India depreciated the value of its currency against the US dollar by around 20 percent," said MA Matin Chowdhury, managing director of Rahim Textile Mills Ltd.
According to Bangladesh Bank (BB) data, L/Cs (letters of credit) worth US$205.39 million were settled in July-October period of 2008 compared to $142.70 million in the same period of2007 to import cotton yam.
In July-October period of 2008 fresh L/Cs worth $150.04 million were opened to import cotton yam against $141.77 million in the same period of2007, the BB data said.
Matin said the other reasons for declining demand for yarn in the local market are the ongoing global financial crisis and over production of yarn by the local mills.
According to BTMA statistics, a total of 43 new spinning mills were
set up in 2008 (January-December) with 9,44,744 spindles and in 2007 a total of 28 mills were installed with 4,42,848 spindles.
At present the country has a total of 341 spinning mills with an annual production capacity of 1600 million kg of yarn and the total investment in this sector is 4.0 billion euros, BTMA statistics said.
As per BKMEA data, Bangladesh consumed 789.6 million kg yam in 2007-08 fiscal year against 658.5 million kg in FY2006-07, while the average consumption growth of yam in the country is more than 21 percent per year.
The country consumed 582.69 million kg yam in 2005-06 fiscal against 424.18 million kg in 2004-05. Such consumption in 2003-04 fiscal was 323.44 million, while in 2002-03 fiscal it was 244.27 million kg.
The added advantage in yam business for India is that it (India) is one of the major cotton producing countries, whereas Bangladesh is a net importer of cotton mainly from Uzbekistan and other CIS (Commonwealth Independent States) countries, Matin said.
"As a result, India can easily dump yam on Bangladesh market," he said.
Echoing Matin's views, Chairman of Prime Group of Industries MA Awal said the newly elected political government should take immediate action against such dumping.
Abdul Hai Sarker, president of Bangladesh Textile Mills
Association (BTMA), said they can sell yarn at $2.55 per kg produced in their factories, but the same kind of Indian yam sells at $2.15 per kg.
"It takes at least three months for Bangladesh to enjoy any benefit from price decline, as the country is a net importer of cotton and recently the prices of raw cotton declined significantly on international market," he said.
As a result, local manufacturers can hardly sell yam at lower price, he added. Sarker said they would call upon the BB governor soon for taking immediate measures to this effect.
Now 30-count variety of yarn, which is consumed most, sells at $2.60 per kg in the local market,
down from $3 three months back.
Bangladesh imports 4 million bales of cotton a year at a cost of over $1 billion, a BTMA official said.
The BTMA chief said local yam manufacturers now supply up to 90 percent raw materials to the knitwear sub-sector and 40 percent to woven.
Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the sales drop in yam indicates that the country has started suffering from the negative impacts of the ongoing global financial crisis.
reefat@thedailystar.net