Bangladesh Garment Industry Hit Hard By Gas Shortages And Rising Import Costs
Bangladesh’s garment industry is facing severe disruptions due to a natural gas shortage, leading to a 13% increase in yarn imports. From July 2023 to April 2024, imports surged to $2.64 billion as local yarn production faltered. This reliance on foreign yarn is straining foreign reserves and reducing local value addition.
Factories need 8-10 PSI of gas to operate efficiently, but pressure often drops to just 1-2 PSI, forcing many mills to run at only 40% capacity. Rajib Haider of Outpace Spinning Mills Ltd. reports that production has plummeted and timely order fulfillment is at risk. Increased operational costs are also impacting the ability to pay workers on time.
Recent government cuts to cash incentives for using domestic yarn—from 3% to 1.5%—and delays in export benefits are pushing manufacturers towards cheaper imports. Mohammad Hatem of the BKMEA warns this could undermine the goal of boosting local production and make the sector overly dependent on imports.
Giant Group reports imported yarn is 40-42 cents per kilogramme cheaper than local options, a significant cost advantage despite a narrowing gap. The BTMA has criticized Petrobangla for failing to deliver promised gas supplies despite a price hike, further complicating the industry’s challenges.
The combination of gas shortages and reduced government support threatens the future of Bangladesh’s vital garment sector.
