A global surge in cotton prices has hiked local yarn prices, threatening the recovery of the recession-hit knitwear sector.
Local yarn prices increased 30 percent in the last two months, making it harder for knitwear makers to ship export orders at the previously fixed rates.
The domestic prices of 30-count yarn surged to around $3.50 from around $2.75 per kg two months ago, they said.
"Yarn price has witnessed a rising trend over two months, but it went out of bounds just 15 days ago," said MA Baset, second vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
Yarn makers said cotton prices rose because there was a global price hike and low production supply. Forecasts that yarn prices will further escalate on domestic and global markets have made things worse.
Abdul Hai Sarker, president of Bangladesh Textile Mills Association (BTMA), also said the domestic yarn price increased because of a global cotton price hike. "It will rise further in future for the same reason."
Global cotton prices have increased by 9 percent recently. Prices have advanced by 20 percent in the last two months on the Indian market, according to Indian newspaper The Economic Times.
Cotton prices surged as world cotton production is likely to dip by 5 percent to 22.2 million tonnes in the 2009-10 season from 23.4 million tonnes last season, it said.
High demand for cotton in China, the strongest textiles player, is partly responsible for the cotton price surge.
But BKMEA President Fazlul Hoque blamed local yarn makers for taking the price hike out of balance. "They are increasing yarn prices much faster than the global rate."
The global price hike could have an impact on local yarn prices two months later, but local yarn prices increased immediately after the global jump, he said.
About 360 yarn makers meet 90 percent of local demand, while the remaining 10 percent is imported, mainly from India, said industry insiders.
The BKMEA leaders urged the government to regulate domestic yarn prices so that the export sector is not hampered.
"We are now buying yarn against export orders that we received two months ago, based on the market price that prevailed at the time. So if prices increase exorbitantly, how we can deliver the orders?" asked Nusrat Bari Asha, director of Bentex Industries Ltd.
On the excessive price hike, the BTMA president said knitters could import yarn if they found local yarn too pricey.
"Last year, when we faced difficulties and waited for domestic buyers with large inventories, local knit manufacturers imported yarn from India at competitive prices. If they could do it then, why not now?"
Knit goods exports dipped 9.67 percent in the first quarter of fiscal 2009-10 compared to the same period last year, according to Export Promotion Bureau statistics.
