Shipment to Europe slows for dry spell, high inflation
Sweater suppliers in Bangladesh are witnessing relatively a dull season because of a longer-than-usual dry spell in European countries and the higher cost of living fueled by the Russian-Ukraine war.
Owing to climate change, some parts of the continent, home to more than 60 per cent of garments exported from Bangladesh, are even witnessing up to 30 degrees Celsius of temperature even in September, which is unusual since summer comes to an end after June in Europe.
A sweater is a winter clothing item: if winter is colder, demand for thick sweater goes up whereas when it is milder, lighter sweater sees higher sales.
But two-thirds of Europe were under some sort of drought warning, in what is likely the worst such event in 500 years, reported BBC in late August, citing a report from the Global Drought Observatory, which is a part of the European Commission’s research wing.
Italy, Spain, Portugal, France, Germany, the Netherlands, Belgium, Luxembourg, and the United Kingdom were under increasingly hazardous conditions.
Another factor is higher inflation.
Inflation in the eurozone hit 9.1 per cent in August, up from 8.9 per cent in July, squeezing the buying capacity of the common people.
As a result, clothing retailers and brands in Europe are either delaying placing new work orders in Bangladesh or have placed fewer orders since sales have slowed.
“International retailers and brands are making delays in taking the delivery of products for which orders were placed between December and March, citing piling up of unsold stocks,” said Shahidul Islam, managing director of Rupa Group, a major sweater exporter.
For instance, a major European sweater sourcing company, which buys nearly $2 billion worth of the item from Bangladesh a year, has put on hold securing finished goods.
“Moreover, many European retailers and brands have closed their stores in Russia. This has also affected the sourcing of sweaters from Bangladesh,” Islam said.
He blamed the long summer for the slowdown in sweater sales. Rupa Group shipped more than $16 million worth of sweaters last year.
Russia is a major sweater export destination for Bangladesh. And the war, which began in February this year, has affected the shipment severely.
Md Rezwan Selim, managing director of Softex Sweater, another sweater supplier, confirmed receiving fewer orders from international buyers since November.
“This is unusual for my factory,” he said.
Although the entrepreneur expresses his hope that the situation would improve a lot from January, none knows how long the war in Ukraine would continue.
Owing to the war, the continent has been facing a serious energy crisis as Russia has largely suspended the supplies of cheap natural gas and the situation could even lead to rolling blackouts, shuttered factories and a deep recession. Russia used to supply 40 per cent of Europe’s natural gas.
The longer summer in Europe and the heat waves that prevailed in most of the continent till the end of August did not have a direct impact on sweater exports by Dragon Sweater & Spinning.
“However, some customers have made delays in taking the delivery of goods,” admitted Mostafa Quamrus Sobhan, chairman of the exporter.
But as temperatures are falling across Europe, sweaters have begun taking space at retail stores.
The actual impact will be clearer after the winter sales period is over. This is because unpredictable climate changes can even lead to extreme winters.
“The dragging shortage of gas across Europe may lead to rationing of utility services, meaning lesser usage of heaters at offices and homes. This may force consumers to buy warmer clothes during the winter period,” Sobhan said.
Although the risk of Europe entering into a recession has intensified, Bangladesh’s sweater export to the continent might not be hurt in a major way since the country produces the items for the low-end markets, said a number of exporters.
However, the shipment to the markets of Ukraine, Russia and Poland seems to have taken a hit due to the prevailing geopolitical crisis.
And if the war continues for a longer period, the future of sweater export for winter 2023 could indeed be unpredictable, Sobhan said.
Poland’s biggest clothing retailer LPP, a major buyer of Bangladeshi sweaters, closed its Russian stores in March after Russia’s invasion of Ukraine, according to Euronews. Sales in Russia accounted for 19.2 per cent of the group’s revenue for 2021-22.
The closure of outlets has affected the sweater export from Bangladesh, exporters said.
In the last fiscal year of 2021-22, Bangladesh shipped sweaters worth $5.64 billion, registering 39.25 per cent year-on-year growth. It was $4.05 billion in 2020-21, data from the Export Promotion Bureau showed.
