Export fall, price slump put jute mills in peril

After a flicker of hope in the fiscal 2010-11, country's jute sector once again tumbled into serious crisis as exports of raw jute and jute-goods are under a downturn in recent days while domestic usage of the natural fibre is also on the decline.
Fund constraints due to unavailability of bank loans made the situation worse yet, industry-insiders said.
A good number of jute-goods, particularly sacks, remained unsold in both public and private jute mills due to low demand on the world market and scanty consumption in the country.
"If the situation continues, most of the private jute mills will not be able to purchase their targeted volumes of raw jute in the current fiscal (2013-14)," said Barik Khan, secretary of Bangladesh Jute Mills Association, which has urged the government to provide fresh working capital to keep the mills rolling.
According to sources, about 30 jute mills have already gone bust in the last one year due to a depressed international market and currency devaluation in India, which accounts almost 60 per cent for Bangladesh raw jute exports.
Jute-made goods worth about Tk 5 billion still remained stockpiled in various jute mills due to a fall in export on sagging demand in the markets abroad, sources say.
Export of jute and jute-goods witnessed a drastic fall in the just-concluded fiscal (2013-14) although the country had enjoyed a robust growth of export from the sector just three years ago.
Export of raw jute had a fall of 45.03 per cent while that of jute sacks and bags 53.65 per cent. Export of jute sacks and bags also saw a negative growth of 54.27 per cent even in the first month (July) of the current fiscal (2014-15).
In 2010-11, the export of raw jute posted a robust growth of 82.03 per cent while that of sacks and bags 51.12 per cent.
Ministry sources said export of the country's jute products fell as neighbouring India, which used to import about 60 per cent of its raw jute and jute-products for re-export, has cut the volume of imports from Bangladesh since 2013.
India used to export the jute-products to Thailand after importing those from Bangladesh, he said, adding that Thailand has recently slashed imports due to political instability there.
Political turmoil in the Middle East, especially in Libya, Egypt and Syria, and massive depreciation of the Indian rupee knocked down the prices over the past one year.
Hit hard by export decline, most of the mills, the industry sources said, are suffering from inadequate amount of capital for procurement of raw jute. Banks are also reluctant to provide funds in advance since most jute mills had defaulted on earlier loans.
Very often than not, mills were found having tough times in repaying their debts because of lack of required net income from their current transactions. Because of the huge debt burden, majority of the mills were in a financially weak position.
Of the 130 members of BJMA, some 38 big mills contribute about 70 per cent of the production. Among the 38 big mills, 20 have already been closed down, three laid off, 15 are occasionally operative and only 12 in operation.
Mills, both in the private sector and under Bangladesh Jute Mill Corporation (BJMC), have long been manufacturing different types of packaging fabrics, hessian, sacking, carpet backing, mats and bags which are exported to different countries. But due to sluggish international market many more mills are now running below their capacity.
According to BJMA, about a good number of jute mills, including Pubali, Mohsin Jute Mill, Shahnewaz, Ajax Jute Mills and Afil Jute Mills, have been closed in the last several months. Many of the mills, sources said, are running partially and may be shut down anytime.
"I have just closed the composite unit of my mills for lack of export orders as well as fall of prices on the international market," said Sk. Akram Hossain, Managing Director of Afil Jute Mills that used to export jute bags and twin to India and Thailand.
Presently, export of 100 bags fetches around 78 US dollars as against USD91 last year. "A metric tonne of twin now sells at USD740 as against USD850 a year ago", said the downhearted entrepreneur.
To finance the ailing jute mills, the central bank has developed a Tk 2 billion refinance scheme for the millers and exporters. But the mills are not getting loan from the refinance scheme due to cumbersome procedures and dillydallying attitudes of the commercial banks, the industry sources said.
The BMJA once again urged the central bank for providing the 'block-account' facilities to the private jute mills against bank loans and allowing fresh loan to the millers.