Fall in cotton prices hits terry towel makers hard

Drop in cotton prices across the globe has come as a serious blow to terry towel industry in Bangladesh as they are gradually losing international competition, sector insiders say.
More than 16 big terry towel factories of the country have been closed in recent times while export earnings declined sharply in last five years as Pakistan and India are getting major orders from foreign buyers.
According to a report run by the Financial Times (FT), cotton prices hit a 6-year low to $ 0.60 per pound in December 2014 due to China's more restrictive import policy in 2014-15.  
"The main cause of low cotton prices is the fallout from China's support programme for its growers," the report said.
"We are trying hard to beat Pakistan, although they are enjoying GSP facility from EU market. The falling prices of cotton help competitors cut their prices further," said Belayet Hossain, managing director of RTT Textile Industries Pvt Ltd.
He added: "We purchase yarn from local spinning mills. The cost of yarn sourcing for a Bangladeshi factory hasn't been reduced to a rate compared to that of Pakistan or India."
Many companies have stopped operation because of lower orders, Mr Hossain said.
According to the Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA), at least 16 out of 97 companies stopped operation in last one and half years.
Export Promotion Bureau (EPB) data shows that export of terry towel has been losing ground since the financial year 2010-11. According to the data, export earnings plunged to just $ 67 million in FY '14 from $ 157 million in FY '10.
However, shipment was 120 million in FY '11 while 92 million in FY '12 and $ 86 million in FY '13.
The downward trend continued as shipment came down to only $ 24.3 million in the first seven months of the current financial (FY '15) from $ 45 million during the same period of FY '14, down by 47 per cent.
BTTLMEA Chairman Khandkar Abdul Muktadir said Pakistan is providing more cash incentives to its producers than those of Bangladeshis after getting the GSP plus facility in European market  from January 1, 2014.
Bangladesh produces cotton what it exactly needs for terry towel, he said. "High quality yarn (20-double) costs us $ 2.25 per kg in Bangladesh which will be less than $ 1.5 per kg for a Pakistani company."
If the government gives them 9.6 per cent cash incentive only on export to EU markets, he said, they could beat the nations competing with them.
BTTLMEA Secretary Md Mujibur Rahman pointed out that towel export witnessed a major setback among home textile items.
Shipment of other home textile items also fell, but not to such an extent like terry towel, he said, adding that home textile sector is still a $1.0 billion earner.
Mr Rahman also said the volume of export has not come down, but its value has declined due to plunge in cotton prices as buyers are offering lower prices for products.
Per tonne terry towel is now offered at $ 5,000-5,500 which was $ 8,500-9,000 one and half years back, he added.
Terry towel manufacturing companies have been growing in the country since 1980s. Bangladesh's terry towel products mainly go to the US, Canada and European markets.
Bangladesh produces different types of terry towels such as face, hand, terry kitchen, stripped bath, assorted coloured bath, dyed terry bath, golf and bath robe for export.
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