• Monday, Aug 02, 2021
  • Last Update : 03:50 pm

Global price hike pummels RMG backward linakge

  • Published at 08:29 pm June 16th, 2021
RMG backward linkage 2021

Insiders said that the steep rise in prices of yarn, kraft paper, polyester and other accessories in the global market threatens local apparel industry

The country's apparel accessories and packaging manufacturers, crucial backward linkage to the apparel industry, have been hit hard due to the fresh rise of soaring prices of raw materials in the international market. 

Industry insiders said that the steep rise in prices of yarn, kraft paper, polyester and other accessories in the global market has threatened the local apparel industry, which had been inching its recovery from the immense difficulties caused by the Covid-19 pandemic.

They also lamented that while the apparel sector was on the rebound thanks to fresh work orders, the accessories and packaging manufacturers never recovered from the losses stemming since the Covid-19 outbreak in January last year.

Industry insiders also said the recent hike of the price of cotton in the international market has also impacted the rise of yarn price in Bangladesh. 

Also Read - RMG accessories manufacturers feel ignored in FY22 budget

Bangladesh is the highest importer of cotton among other countries.

Accessories and packaging industry owners said that they are incurring losses as they have to import raw materials at a higher price, but are deprived of a fair price from domestic clients.

SM Amzad Hossain, managing director of Al Muslim Accessories Ltd, said that a steep increase in the demand for raw materials resulted in the price hike in the international market.

“Rising prices are adversely affecting our sector. We are producing by buying raw materials at higher prices so the cost of production has risen,” he added.

He also said that although the RMG items export has increased, accessories manufacturers have to sell their products in losses as their domestic buyers are not ready to pay higher prices.

According to Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), prices of raw materials have started rising since January of this year. Over the last five months, the prices of necessary raw materials such as polymer, yarn, kraft paper and chemicals ranging between 40% to 80%.  

Amongst them, prices of yarn increased to $3.5 from $2.5 per kg, polymer has shot up to $1,600 from $960 per ton, and kraft paper jumped to $1,400 from $880 per ton, said the BGAPMEA.

Moreover, the prices of ink have also soared to $9-12 from $7 per kg where the price of chemicals have increased to $90 from $55per kg, BGAPMEA said. 

Industry insiders also said that as the apparel prices have plunged in the global market, the accessories manufacturers are not getting usual prices for their products.

Md Arif Hossain, owner of Bengal Labels and Accessories Industries, said that the cost of production has increased by 40-50% for importing raw materials at higher prices.

Also Read - BUDGET FY 2021-22: Garment accessories producers demand lower source, corporate taxes

“Our domestic client offers 5-10% higher price. But I have no options except taking the orders to keep factory running,” he added.

Abdul Quader Khan, president of BGAPMEA said that the price of raw materials as well as freight costs have shot up which impact our production cost. 

“But we are still not able to sell at a higher price because none of the RMG manufacturers we do business with in the local market can raise the price. So, our sector is struggling for survival,” he added. 

He demanded that the government offer a 1% cash incentive against exports and reduce corporate tax to 12% for the garment accessories sector in the proposed budget, saying that though the current situation is not related to our national budget. 

“If we get this, it will help us to keep our businesses operating smoothly and to pay the utility bills and other production costs,” he added.

Talking to Dhaka Tribune, Syed Nazrul Islam, first vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said: "We can't buy accessories at high prices because we are getting lower prices for RMG items from our foreign buyers." 

"We have to pay workers’ wages through bank loans. Moreover, the increase in the price of accessories, keeping the factory open in line with social distance has increased our production costs by 25-30%,” he added.

He asked how they can pay more for packaging items and accessories while their production cost has increased, and they do not get additional value from buyers.

According to BGAPMEA, currently there are about 1,800 factories producing 40 types of garment accessories and packaging items in the country with employment of nearly 700,000 workers. 

This backward linkage industry meets 95% of the demand of the country’s RMG sector, which accounts for 86% of the national export earnings.

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