Bangladesh’s Cotton Consumption To Bounce Back

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In 2020-21 marketing year (MY), Bangladesh’s raw cotton production is forecast to slightly increase over current MY (2019-20) to 146,000 bales and imports are forecast to rebound to 7 million bales

The Covid-19 pandemic has negatively impacted cotton imports and consumption in Bangladesh in the current marketing year (August 2019 to July 2020) but these are projected to rebound later this calendar year on an expected marginal increase in yarn and fabric demand in the new year as the RMG sector recovers from the coronavirus shock.

A recent report of the United States Department of Agriculture (USDA) says, in 2020-21 marketing year (MY), Bangladesh’s raw cotton production is forecast to slightly increase over current MY (2019-20) to 146,000 bales and imports are forecast to rebound to 7 million bales. As a result of Covid-19 mitigation efforts, Bangladesh’s readymade garment (RMG) facilities halted production for nearly a month during the government-ordered lockdown. Additionally, some global retail brands have cancelled or delayed contracts for garments as a result of a decline in global garment demand.

In coming months (from August this year to July 2021), both yarn and fabric production levels are projected to increase to 730,000 MT and 4.1 billion meters, respectively; which represents a 1.39% and 2.5% increase over the figures of corresponding period of 2019-20. USDA says, the forecasted increase is based on an expected marginal increase in yarn and fabric demand in the new year as the local RMG sector recovers from the negative economic impact of Covid-19.

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In 2019-20 MY, yarn and fabric production forecasts have been revised down to 720,000 MT and 4.0 billion meters, which represent an 11% and 17% decrease from 2018-19 figures, respectively.  The decrease in production is the result of Covid-19 mitigation efforts (e.g., country lockdown) and depressed demand as the global economy slows. Select RMG factories have also started to shift production to medical personal protective equipment (PPE), which does not require cotton yarn or fabric. According to the Bangladesh Export Promotion Bureau, March 2020 apparel exports declined by over 19% compared to February, 2020. Bangladesh Garment Manufacturing and Exporter Association (BGMEA) estimated RMG export revenue to be a mere US$ 366.5 million in April 2020, or approximately 84% lower than the same period last year.

The textile industry was greatly impacted by some international retailers cancelling and suspending orders as a result of COVID-19. USDA quoted BGMEA to state that the estimated cost of cancelled orders was US$ 3.17 billion thus far and the cancelled orders impacted local producers’ ability to pay 2.3 million workers and has resulted in an increase in stocks of yarn & fabric.

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According to industry reports, stocks of locally spun yarn reached nearly US$ 100 million in September 2019. A representative of the BGMEA estimated export earnings to decrease further in May and stated the total loss could be as high as US$ 6 billion.

Over the 2018-19 MY, RMG export earnings were approximately US$ 34.4 billion.  RMG exports during the first seven months of the current marketing year reached US$ 18 billion as of February 2020.

Bangladesh currently has 433 spinning mills, 796 textile weaving mills, 246 dyeing and finishing mills, and around a total 6,502 registered and 527 unregistered garment and textile factories. Approximately 4,621 BGMEA members employ 4.5 million workers at their garment factories, of which 80% are women.

USDA report says, in 2020-21 MY raw cotton consumption is expected to rebound to 7.2 million bales, assuming that demand for garments will start to return to pre-Covid-19 levels. Raw cotton consumption levels in current marketing year are estimated lower at 6.9 million bales due to reduced RMG consumption in the world market as an impact of Covid-19. Similarly, in coming marketing year, yarn and fabric consumption is expected to increase by approximately 5.5% to 0.95 Million MT (MMT) and 3.33% to 6.2 billion meters based on an increase in demand as retail stores and shopping outlets reopen.

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Yarn and fabric consumption estimates have been reduced to 0.9 MMT and 6 billion meters, respectively, in current marketing year due to depressed demand for garments.  Prior to the economic slowdown, the garment industry was already facing several challenges.  Challenges include higher wages, added costs associated with new quality and compliance standards, and intense local competition.

Nearly 80% of garments made in Bangladesh are sourced from cotton; the rest are made from viscose, polyester and other materials.  Local spinners supply 90% of raw materials for knitwear and 40% for the woven garments sector.

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