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Global cotton suppliers eye Bangladesh market

  • Published at 08:11 pm March 17th, 2016
Global cotton suppliers eye Bangladesh market

Bangladesh has become a lucrative market for global cotton suppliers as its cotton consumption continues to rise on the strong performance of apparel sector.

“It is one of the fastest growing sector. So, for us it is a very important market,” International Cotton Association (ICA) Vice-President Jurg Reinhart told the Dhaka Tribune in an interview recently.

Currently, suppliers, mostly from India, CIS and West Africa, supply cotton worth over $2 billion to local spinners annually, which accounts for 16% of the total $12 billion cotton export globally, according to the ICA.   

The country now consumes over four million bales of imported cotton a year with more than 15% consumption growth rate annually.

China is the biggest producer and consumer of cotton and its high local reserve leads to the reduction of cotton import, allowing for Bangladesh to become the largest importer in the world.

“Moreover, Bangladesh does not produce much domestic cotton,” said Reinhart.

Bangladesh cotton import continued to rise over the last five years. In 2015, the country imported a record over 6 million bales of cotton, up around 10% from 2014 and almost 40% from 2011, according to Bangladesh Textile Mills Association.  

Since 2009, the country has been the world’s second largest exporter of clothing after China.

“Magical growth of garment industry will continue in Bangladesh,” said the ICA vice-president. 

He said Bangladesh is a world leader in the export of ready made garments, and currently it projected to expand exports further by increasing production capacity and developing high-end products.

In this situation, Bangladesh needs an undisrupted and stable supply chain of cotton to keep the production with efficiency, added the ICA official.

“The ICA plays a vital role in the world’s cotton supply chain  by giving protection to the producers, traders and consumers,” said Reinhart who along with his other colleagues visited Bangladesh as part of the celebration of 175 years of ICA, the Liverpool-based policymaking body for cotton trade. 

It has a set of bylaws and rules to help regulate the sale and purchase of raw cotton.

Today 85% of the world’s cotton is traded internationally under ICA bylaws and rules. The rules have changed with time, but their aim remains the same to create a safe trading environment.

The ICA now has more than 550 members and its membership spans all corners of the globe and represents all sectors of the supply chain. It offers a range of services -- arbitration, training, trade and networking events, plus cotton testing and research.

“The rules are vital to keep the supply chain intact,” said Kai Hughes, ICA Managing Director.

Some cotton importers of Bangladesh are not fully unaware about the rules while executing cotton contracts. 

“So, we are here to make them understand our rules better for better supply chain,” said Kai. 

On price volatility, the ICA said cotton prices have been subject to extreme volatility from 2008 with prices rising and falling by over 100% in value between 2010 and 2013.

During the period, the organisation provided protection of the buyers and sellers of cotton by developing mechanism.

David Cavalleri, a Switzerland-based cotton trader and Co-Founder and managing director of Faircot, said improving commitment to maintain the flow of better cotton throughout supply chain is needed for sustainable growth of textile industry.

Over the last few years, cotton price has declined below production cost in some growing regions, but the government should keep farmers happy to continue production, he said.

Hissam Khandker, a local cotton trader and director of Delcot Enterprises Ltd, said the ICA rules have played a part in Bangladesh’s cotton trade since independence. 

It has created a safe environment for the cotton trade as it protects both buyers and sellers during price volatility and acts as an arbitrator to resolve disputes, he said. 

The rules, however, need to be better understood and spinners need to be encouraged to voice their views on how to adapt the rules to the growing needs of spinners, he added.

Over the last two years, many Bangladeshi cotton consumers have come forward to settle the disputes on cotton contract under the ICA rules, which basically help reduce defaulters, said Hissam. 

“People need protection as they want to secure supply chain under the ICA rules to feed spinning mills that consume 60% raw materials from cotton.”

The ICA has selected a Bangladeshi spinner Salman Ispahani for 2017-18 as its president, emphasising the importance of cotton trade in Bangladesh, according to Hissam. 

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