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Bangladesh faces reduced orders, increased costs and delayed orders

Bangladesh is experiencing a slowdown in apparel export growth in 2021. According to foreign media reports, after Bangladesh experienced more than 30% growth in 2021, Bangladesh’s clothing export growth may dro…

Bangladesh is experiencing a slowdown in apparel export growth in 2021.

According to foreign media reports, after Bangladesh experienced more than 30% growth in 2021, Bangladesh’s clothing export growth may drop to around 15% in 2022, due to US and European customers. Consumption cools down.

Bangladesh is the world’s second largest clothing exporter after China. The clothing industry exports account for more than 80% of Bangladesh’s total exports. Its customers include Wal-Mart, Gap, H&M, Zara, American Eagle Outfitters, etc., some of which have seen weak sales in Europe and the United States.

While demand is slowing, the regional energy crisis is also weakening the delivery capacity of Bangladesh’s garment industry. Energy supply is the key to timely delivery of products, but currently Bangladesh has to take Some load shedding and limiting power production measures to save electricity.

The reporter said that Bangladesh is indeed relatively vulnerable in terms of exports, facing the problem of insufficient raw materials and various supporting capabilities. Once an energy crisis occurs, it is prone to deficit.

Reduced orders from overseas customers

Affected by the epidemic, Bangladesh will China’s garment exports have been affected, with exports amounting to only US$27.45 billion, a year-on-year decrease of 17%, lagging behind Vietnam.

Starting from the second quarter of 2021, Bangladeshi garment manufacturers began to receive more orders from Europe and the United States. In the first ten months of the 2021/22 fiscal year (July to April of the following year) ) Bangladesh’s garment exports reached US$35.362 billion, exceeding the target of US$35.144 billion for the year.

According to statistics from the Bangladesh Export Promotion Bureau, Bangladesh’s clothing exports increased by 35.98% year-on-year from July 2021 to April 2022. Knitted clothing is still better than woven clothing. During this period, Bangladesh’s knitted garment exports were US$19.242 billion, a year-on-year increase of 37.49%, and woven garment exports were US$16.119 billion, a year-on-year increase of 34.23%.

However, Bangladesh’s clothing exports only took 10 months to complete this year’s target and failed to extend to the second half of the year. Since entering July, Bangladesh’s garment industry has faced the problem of declining orders.

Fazlul Hoque, managing director of Zara supplier PlummyFashions and former chairman of the Bangladesh Knitwear Manufacturers and Exporters Association, said that the new products in July Orders fell by 20% year-on-year, and retailers in European and American markets either delayed shipments of finished products or postponed orders. He revealed that his customers have postponed orders for about a month and reduced the size of orders.

After Hogg warned them about possible penalties and other fees for long-term stocking, the customer later requested a delay of only one month. “If they want to delay such a small order for a few months, it means that the situation is not good and they can’t even accommodate such a small order.”

Hogg said he believes the growth rate of Bangladesh’s garment exports will slow down to about 15% this year.

Miran Ali, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), also said: “Our growth rate this year should be around 15%. This It will be a normal year, last year’s growth was an unusually high jump.”

Rising energy prices increase production costs

Another concern for Bangladeshi exporters is the rising input costs. As of the 6th, Bangladesh has increased fuel prices by about 50% amid high international oil prices.

Energy accounts for about 10 percent of a clothing company’s total costs, Hogg estimates, and businesses have increased their use of diesel generators due to prolonged power outages. .

“After oil prices rise, production costs will rise sharply.” BGMEA Vice President Shahidullah Azim said, “We will have to pay for the oil we have obtained. Orders bear the loss.” He estimated that Bangladesh’s garment exports this year may be between 38 billion and 40 billion US dollars, a growth of 6% to 12%. If the global economy falls into recession in 2023, the situation may be worse.

Cui Fan explained to reporters that many exporting countries do not have strong pricing power, which has also become an important factor restricting their profits.

Bangladesh Petroleum Corporation (BPC) Chairman ABMAzad recently stated that there are currently enough diesel stocks to meet 32 ​​days of demand. He said that the Bangladesh government has also determined fuel import plans for the next six months, and a ship carrying 50,000 tons of octane will arrive soon. Bangladesh’s current gasoline inventory is 21,883 tons, which can meet 15 days of demand; octane inventory is 12,238 tons, which can meet 9 days of demand; furnace oil inventory is 85,041 tons, which can meet 32 ​​days of demand; jet fuel inventory is 62,891 tons, which can meet demand 44 days required.

In July Bangladesh became the third South Asian country to seek loans from the International Monetary Fund (IMF) after Pakistan and Sri Lanka due to shrinking foreign exchange reserves, The trade deficit soared.

The latest data shows that due to increased imports, Bangladesh’s trade deficit surged to a record high of more than 33 billion US dollars as of June 30. Bangladesh’s foreign exchange reserves fell below 40 billion for the first time in two years in July, weighed down by rising import bills and a weakening taka driven by a surge in the dollar in recent months.Dollar. According to data from the Bangladesh Bank, the country’s foreign exchange reserves soared to US$48 billion in August 2021. However, after an abnormal increase in imports, its foreign exchange reserves fell to US$41.86 billion in late June 2022.

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Author: clsrich

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