Yarn prices rise as cotton soar once again

Cotton prices in the global market rose sharply to $1.37 per pound last Monday, the highest in eleven years, raising serious concerns among export-oriented apparel manufacturers as it would push up the already high yarn costs.

Cotton prices per pound had previously hit $1.19 on February 28, reveals data from the US multinational financial services corporation NASDAQ. Previously, in February 2011, the price of per pound cotton rose to $2.13.

Apparel exporters claimed that the yarn manufacturers have already increased their prices by $0.1 to $0.2, which is severely impacting the ready-made garment (RMG) industry.

Meanwhile, yarn manufacturers claimed that per pound cotton LC (letter of credit) prices have reached $1.45, which is why they will increase yarn prices – already at $5 per kilogramme – even further.

Commenting on the issue, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Director Asif Ashraf said, “Their [yarn manufacturers] recent price hikes are not fair because per pound cotton prices were around $1.1 to $1.2 when they opened LCs.

“We are facing difficulties due to the price increase with any prior notice. We received our current orders around three months ago, and the buyers have not agreed to a price readjustment.”

Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon said, “We had previously dropped yarn prices as the cotton prices went down slightly. But ever since the Russia-Ukraine war began, cotton prices and freight fares have been increasing day by day.

“This is why we had to increase the yarn prices yet again. The exporters should have taken into consideration the possibility that yarn prices could go up further, while accepting work orders from global buyers.”

According to the Export Promotion Bureau (EPB), export earnings from the apparel sector rose by 30.73 per cent to $27.49 billion in July-February of FY22, compared to $21.03 billion in the same period previous year.

In early 2021, the US and the European Union (EU) clothing brands banned clothes made in the Xinjiang region of China over allegations of forced labour. Beijing has been reportedly cracking down on the Muslim minority population in that region.

European Members of Parliament also adopted a regulation against Xinjiang’s cotton products for the same reason.

To circumvent the ban and continue exports, China – the world’s largest apparel exporter – has been purchasing a huge amount of cotton from the international market to fulfill their demand as an alternative to Xinjiang’s cotton, and it is causing a supply shortage.

Besides, the Russia-Ukraine war has caused the fuel prices to increase globally, which heavily impacted cotton prices in the international market. Even India – one of the largest cotton and yarn suppliers in the global market – is witnessing all time high rates.

Stating that the apparel makers are out of options, Bangladesh Knitwear Manufacturers and Exporters Association Executive President

Mohammad Hatem said, “The buyers have refused to allow any price adjustments to cover the increase in yarn prices.

“We have no option but to export the goods if we want to keep the buyers, even if we have to do it at prices below manufacturing costs.”

He added, “The government should give us permission to import yarn from all land ports in the country, and allow partial shipments. We will then be able to import yarn from India easily, as their prices are cheaper than that of local yarn.”