Cotton use to grow 4pc on higher demand
Bangladesh's cotton consumption will rise 4.08 percent in fiscal 2015-16, riding on higher demand from local spinners and foreign investors in the textile sub-sector, the London-based Economist Intelligence Unit (EIU) forecasts.
Consumption will increase to 1.02 million tonnes despite poor safety standards, mainly due to a shift in investment in the textile sector from India and China, the EIU said. This is the first time that cotton consumption will cross the one million tonne mark.
The EIU is the research and analysis division of the Economist Group that owns the Economist newspaper.
“Cotton consumption in Bangladesh will increase if the investment proposals in the textiles sector from aboard are really implemented here,” said Jahangir Alamin, the immediate past president of Bangladesh Textile Mills Association.
The local spinners have been running their mills under capacity due to an inadequate supply of gas and power, he added.
“The EIU's prediction on cotton consumption may come true as the country's garment exports are on the rise,” Alamin told The Daily Star by phone.
“The country's competitive labour costs have encouraged relocation by Indian and Chinese companies, and investment is expected to continue over the next two seasons,” the EIU report said.
Although the government has announced its intention to introduce genetically modified cotton to increase domestic production, Bangladesh remains heavily reliant on imports, according to the EIU report published on January 1.
The country currently imports more than 0.98 million tonnes of cotton a year from the US, India, Pakistan, Australia, Uzbekistan and others countries; poor safety standards continue to be a downside risk to the forecast, according to industry insiders.
The total investment in the primary textiles sector is around four billion euros. Local spinners can supply 90 percent of yarn for the knitwear sub-sector and nearly 40 percent of fabric for the woven sub-sector.
The death of over 1,100 workers in the collapse of a factory in Dhaka in 2013 put the garment industry, which accounts for about 80 percent of Bangladesh's exports, under scrutiny.
Safety challenges in the sector present the risk of Western buyers turning to other markets in the region in search of better standards and greater regulatory stability, said EIU.
On the international front, the EIU said global cotton consumption is to expand by 3.3 percent in 2014-15, following a small decline of 0.5 percent in 2013-14.
China has now dramatically slashed its non-tariff import levels as the country grapples with its burdensome stockpiles.
“We expect strong consumption growth in India, as well as in smaller consumers, such as Bangladesh and Vietnam,” said EIU.
Cotton's low price will make it attractive compared to synthetic alternatives in the short term.
“We expect consumption growth to slow slightly in 2015-16, to just below 3 percent, but note that there remain downside risks to these forecasts given the textile sector's exposure to global macroeconomic trends,” the EIU said.
Bangladesh imports woven fabrics worth more than $5 billion a year mainly from India and China as the local weavers can only supply 40 percent of the fabrics to the garment makers, Alamin said.
“The local weavers cannot supply an adequate quantity of fabric to the garment makers due to lower investment in the sub-sector as the investors require higher capital.”