Yarn prices soar as virus fear triggers panic buying
Prices of yarn marked a sharp rise in the domestic market over the last one month as the coronavirus fear has triggered panic buying, according to industry insiders.
The widely-consumed 30-carded yarn is now selling between $2.95 and $3 per kilogramme -- an 11 per cent increase from a month ago, said Monsoor Ahmed, secretary of the Bangladesh Textile Mills Association.
Yarn prices had been showing an upward trend since last October due to higher demand from garment manufacturers, Ahmed said, adding that the virus outbreak is now fuelling the prices further.
However, the primary textile sector that comprises spinning and weaving is not affected yet as the supply chain remains unscathed.
The garment makers need not worry as the local textile millers and spinners are ensuring uninterrupted supply of yarn and fabrics, Ahmed said.
The prices of yarn increased 15 per cent over the last one month in the coronavirus fallout, according to a letter from Bangladesh Garment Buying House Association (BGBA).
The BGBA leaders submitted the letter to the textiles ministry and met with the commerce minister last week to discuss the situation.
Since cotton prices did not increase in the global markets, there is no reason the yarn prices should go up in the local market, said the letter signed off by BGBA President KI Hossain.
"We will lose our competitiveness in the international markets if the yarn prices go up further as our buyers will not give higher prices for our garment products."
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) last month sought special financial assistance from the central bank to steer clear of any negative impact of the coronavirus on the garment supply chain.
The supply chain of fabrics and other raw materials has been affected badly due to the outbreak as Bangladeshi apparel makers source 46 per cent of their raw materials from China, the BGMEA said in a letter to the Bangladesh Bank.
In fiscal 2018-19, imports from China amounted to $13.63 billion, $5.02 billion of which were textiles.
"Given the dependence of the garment sector on China for its raw materials and the fact that the epidemic may linger, it could prove fatal for the industry as the supply chain will be paralysed," the letter read.
Overall imports from China plummeted 21 per cent in January from a year earlier, and plunged further to 37 per cent in the first week of February, according to data from the National Board of Revenue and the BGMEA.
Against this backdrop, the BGMEA called for support in the form of disaster assistance fund, credit guarantee scheme and amendment to the back-to-back letter of credit (LCs) rules.
The disaster assistance fund may be extended to factories/exporters to support unforeseen costs such as air freight, sourcing of raw materials and accessories from alternate and more expensive options to complete the orders and cost of financing for the extended period, the BGMEA said.
While exporters will negotiate with buyers, banks should be willing to extend the credit term by 30-60 days due to late arrival of raw materials and increased costs for the extended period.
"Given the scenario that there could be potential delays to recover from this crisis, the central bank may consider a special credit guarantee scheme to encourage commercial banks so that they can continue to support the industry."
Since goods from Chinese suppliers would be delayed, Bangladesh Bank may issue policy directives to the scheduled banks to amend the respective clauses in the back-to-back LCs to make the payments to suppliers conditional and justified, according to the BGMEA letter.
The association also asked its member factories to raise awareness among workers about the virus and opened a "BGMEA coronavirus control room" at its head office.