15 jute mills closed over fall in demand, prices of products

The country's as many as 15 jute mills have been shut down recently and many others are on the verge of closure because of lower demand of jute products and their price fall in the international market, industry people said.

They also blamed devaluation of Indian currency (Rs) and impact of international politics for the situation.  

"Both demand and price of local jute and jute goods have drastically declined in the international market for the last couple of months that forced many of our mills to close down," deputy managing director of Janata Jute Mills Ltd Mahmudul Huq told the FE.

The 40-year-old unit has been recently shut down due to the aforesaid reasons. It used to produce mainly jute sacks and bags, and export those to countries like India, Thailand, Egypt, Syria, Turkey, Iraq and Sudan.

Mr Haque said, "Demand for local jute and jute goods has drastically fallen in the world market in the current fiscal year (FY), 2013-14, largely because of decline in export to India, the main importer of raw jute from Bangladesh."

According to him, India alone imported about 0.89 million bales of raw jute in the last fiscal. But, it has imported only around 45,000 bales during the first eight months of the current FY.

He said following the fall in demand, buyers are quoting lower prices of jute goods. Sometimes, the importers are offering prices below the production cost.

"Buyers are now offering US$780 to $810 for a tonne of 16/2 ply jute yarn against its production cost of $950. So how the mill owners can continue business in such an uncertainty," he posed a question.

According to the millers, Iran, another raw jute importer, has also slashed buying jute due to economic sanctions imposed on it by the western countries, and the prevailing sour relations with Pakistan and the instability in Syria and Egypt, causing a decline in demand.

However, the condition of the mills running under Bangladesh Jute Mills Corporation (BJMC) is worse than those of the private sector ones, a high official of the corporation told the FE.

He said the corporation cannot even clear dues of the suppliers for a long period due to liquidity crisis in the face of the sluggish demand.

"BJMC's dues to small-scale jute traders and jute farmers stood at around Tk 3.50 billion in the current fiscal," he informed.

Meanwhile, chairman of Bangladesh Jute Spinners Association (BJSA), Shabbir Yusuf said a good number of mills are running partially, and if the situation does not improve soon, many of the mills may be shut down anytime.

"Among others, 5/6 jute mills, including Pubali, Mohsin Jute Mill and Ajax Jute Mills, were closed in the last five months. So you can easily imagine the situation," he said.

The BJSA president, however, also raised his voice against the government's 'failure' to implement a packaging law for compulsory use of jute sacks to pack food grains and other items.

"The domestic demand would get a boost, if the law was implemented properly. It could rescue the trouble-torn mills from closure," he said.

Though the law was passed in 2010, the government is yet to implement it mainly due to absence of associated rules and regulations. But India, a strong competitor of Bangladeshi jute millers, implemented such a packaging law in 1987.

However, according to the Export Promotion Bureau (EPB) data, the country's export earnings from jute and jute goods have drastically fallen by more than 20 per cent on year-on-year basis and fell nearly 28 per cent short of the target.

The country earned $534.76 million during July-February period of the current fiscal against $674.40million in the corresponding period of the previous fiscal.