Supply interruption, soaring raw material prices.
Apparel exporters are having severe difficulties in securing raw materials due to supply interruptions caused by the energy crisis in China going on for multiple months, and the industry insiders have no idea when this shortage will ease.
Besides, raw material prices have increased by 5 percent to 10 percent because of the poor supply against demand. These issues have nearly doubled the readymade garment exporters’ lead time and increased their manufacturing costs significantly.
Local manufacturers told The Business Post that China’s raw material production has already dropped by around 50 percent. As Bangladeshi importers currently have no alternatives to China, this shortage could become the sector’s biggest crisis in the coming days.
Apparel makers are now at a big risk of missing their shipment deadlines, and Bangladesh could lose its competitive edge in the global market, they added.
On the matter, Team Group’s Managing Director Abdullah Hil Rakib said, “Due to delays caused by suppliers, at the least, we need an additional 20 days to get the raw materials, which in turn is causing us further delays.
“Our suppliers have asked for 50 to 55 days to ship raw materials sourced from China, which was around 30 days during the pre-Covid period. But buyers are pressuring us to decrease the lead time as they need delivery of their products as soon as possible.”
Bangladesh’s RMG sector meets most of its raw material demand through imports, and around 60 percent of those are imported from China.
China has been facing an energy shortage for the last couple of months due to the global gas and fuel crisis, and the issue has disrupted its production line.
To solve this crisis, China imposed a ration-based electricity policy and increased fuel and gas imports, but it is still not enough to meet the country’s demand, recent media reports say.
Bangladesh Garment Manufacturers and Exporters Association’s (BGMEA) Vice President Shahidullah Azim, also a manufacturer of woven items, regularly imports fabrics and other raw materials from China.
Detailing his predicament, Azim said, “Due to the power shortage in China, I am now in a big crisis. Suppliers are taking around 20 days of additional time, but even then, they are failing to meet the deadlines. Besides, low supply is causing the material costs to go up day by day.”
“Not only just woven items, but fancy knit items too are based on imports, and their manufacturers are facing the same crisis. This is deep trouble for us, as we are now incapable of shortening our lead time.”
Nipa Group’s Managing Director, and also a Director at the BGMEA, Md Khosru Chowdhury said, “Because of the power shortage in China, their production has dropped by around 50 percent. For this reason, our suppliers have sought an additional four weeks for raw material delivery, but even with the extra time, they are failing to meet deadlines.
“The freight costs in China have gone up by 60 percent – 70 percent due to the upcoming New Year celebrations, and the cost of fabrics has gone up by 15 percent as well. The suppliers are now declining to predict how much time they need to deliver our raw materials.”
RMG accessories sector in trouble too
A number of industry leaders said the garment accessories sector is suffering from the same crisis because of China’s power shortage. They are failing to collect raw materials in time, and the suppliers are hiking the prices too.
Under the circumstances, the RMG accessories sector is witnessing an increase in lead time and manufacturing costs.
Al Shariar Ahmed, managing director of accessories manufacturing company Adzi Trims Ltd, said Chinese suppliers used to take 15-20 days as their lead time, but now they are taking up to 45-60 days.
“We do not have any alternatives to China. We have failed to collect raw materials in time, and for this reason, we cannot provide accessories to the local garment exporters within the deadline. This issue has hampered their shipment, turning this into a macro problem.”
Speaking to The Business Post on Thursday, BGMEA President Faruque Hassan urged all apparel exporters to take work orders below their capacity to prevent overlapping or deliveries through relatively expensive air cargo. He also requested exporters to practice fair prices.
Faruque added, “If a factory gets booked to overcapacity, it will face crisis as we do not know how long the raw material crisis will continue. So, ensuring fair prices are a better move than tackling over-production with lower prices.
“We must strengthen and boost investment in our backward linkage industry – especially the man-made fiber sector – to reduce our dependency on imports.”
