\\\'Undercutting\\\' threatens jute spinning sector

Yasir Wardad | Published: April 08, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

'Undercutting' has now posed a great threat to the oversaturated jute spinning sector.
This is depriving the country of a large amount of export earnings and also giving the importers a bargaining power, industry insiders said.
The ominous trend has caused a massive reduction in export income in the first eight months (July-February) of the current financial year (FY'14). Shipment was reduced to 0.309 million tonnes in volume which was nearly 0.344 million tonnes in the last financial year (FY'13), Bangladesh Jute Spinners Association (BJSA) data revealed.
Export income also was reduced to Tk25 billion during the period which was Tk26.30 billion in the corresponding period of last year.
According to business terminology, 'undercutting' is the practice of offering a product or service at a price that is deliberately set below the price charged by the competitors. This tendency is directly affecting the jute spinning sector, they said.
Bangladesh is the key source of jute yarn in the world, supplying 90 per cent of the global requirement of nearly 0.7 million tonnes, according to the Department of Jute (DoJ).
Carpet and other handicraft industries in Iran, Turkey, Egypt, Sudan (both North and South), Syria, India and China are the main destinations for Bangladeshi jute yarn. The number of the country's jute spinning mills has increased to 97 recently from 80 five years back.
"Production has increased to 0.75 million tonnes annually against the export demand of hardly 0.60 million tonnes," Chairman of BJSA Md Shabbir Yosuf said.
He said: "Bangladesh is the key supplier of jute yarn and she should have the hold of the bargaining power. But the tendency of 'undercutting' of a few players is affecting the whole sector."
Mr Yosuf, also Managing Director of the Faridpur Jute Fibres said: "The price is hovering between $850 and $800 per tonne, but many of the exporters are selling it much below the price."
"The price was $1,250-1,400 per tonne one and a half years back. Decline in demand in importing nations and uneven 'undercutting' offered by the local players have caused a drastic fall in the price," he said.
Deputy Managing Director of the Janata Jute Mills Ltd Mahmudul Hoque told the FE that orders from newly emerged markets like China, Russia and the US had shrunk this year.
Depreciation of the Indian rupee against the US dollar was also discouraging the Indian buyers from importing Bangladeshi yarn.
He said the export income in the jute sector has been reduced while the price of quality raw jute has increased significantly in the local market.
"But, the government, without considering it, has reduced export subsidy for the current fiscal year (FY) to 7.5 per cent from 10 per cent fixed earlier," he said.
"The sector contributes more than 65 per cent to the export earnings of the jute sector. The contribution could be increased by more than 25 per cent if this 'undercutting' practice could be stopped," Managing Director of the Malek Jute Mills Ltd Md Ahmad Hossain said.
"The exporters need to be more conscious and should increase their professionalism to remove the practice," Mr Hossain, also former chairman of the BJSA, said.
However, following a decline in demand, many of the millers are now on a move to reduce their production.
Managing Director of the Karim Jute Mills Ltd Md Zahid Mian said many of the factories have experimentally introduced 'two-shift'-based production instead of three shifts following the trend of price fall in the importing countries.
According to the state-run DoJ, the country has now 97 jute spinning mills, where 80,000 workers produce 0.75 million tonnes of yarn annually.
The sector exported nearly 0.52 million tonnes of yarn and fetched around $506 million in FY '13, which was 60 per cent of the total earnings from the jute sector.
This year the export target has been fixed at $557 million, Export Promotion Bureau data showed.
Bangladesh is home to 4.2 million jute farmers, who cultivate jute on 0.75 million hectares of land and produce 1.3 million tonnes of raw jute annually, according to DoJ.