Movement of Terry towel market
Terry towel market is interestingly competitive among the countries of the Asian region. Bangladesh is emerging strong in this sector.
Terry Towel market
Six years back export figure touched the US$ 10,0000,000/- milestone- terry towel industry. The export growth was also encouraging- but first stumbled in 2010-11 financial year when export declined by 23% in comparison with the same last year. Manufacturers and exporters blame the unexpected rise of cotton and threads price at that period. Many spinning mills also exported their produces to India rather creating a market short of supply that aggravated the crisis. Due to this 50% of the factories lay off then, resulting in a short of achieving the export target. The challenge is how to cope up with that nature of crisis. So, regular and un-interrupted supply of raw materials are become a key factor in this sector, secondly, more focuses on local marketing, as local market is currently fully under the control of local manufacturers, also to note that this sector pays a good amount of VATs also.
As per Export Promotion Bureau Statistics- since 2003 growth rate in this sector was ranging from 6% to 88%. Highest earning from export came in 2009-2010 an amount of US$ 1570,000,000/- against the same previous year’s US$ 1325,000,000/-.
At present Bangladesh has been making 35 different types of terry towel products, among which some mentionable popular items are- shopping bag, bath robs, golf, beach, glass, Tea towel, floor mat, Hajj Ihram, napkins etc. It is assumable that USA is the prime market, after that Canada, Australia, Japan and EU lead the table. Military, Navy and Air force are the domestic bulk buyers.
Historically in 1988 first ever terry-towel factory began its journey at the Chittagong Export Processing zone. First export started in 1990 from that factory. In the one hand it has a huge overseas demand and the raw materials are locally procured and managed, that’s why most of the investors are local entrepreneurs.
At present there are many other districts that are hosting this type of factories all around the country. Most of these factories definitely depend on export market and some also sells in the domestic market. In total almost one hundred factories are busy making terry towels in Bangladesh, among which 76 are officially registered with the Association.
Everyday Bangladesh is making 250tons of terry towel, and almost fifty thousand people are engaged with at various level of input-output process. In fact no terry towels are importing in Bangladesh at this moment as it adds 35% VAT on import, although some clever businessman branding their local products with foreign fake foreign brand names or sometimes print other famous country’s name on it. Unethical profiteering. 65% of total USA import is supplied by India, Pakistan, and China. Bangladesh is still having a niche market size. Bangladesh explored its new market in Malaysia competing in quality and price.
Main problem of this sector is raw material, i.e., waste-cotton; supply is less than demand. Currently, local spinning mills are the suppliers; second problem is unstable price of the raw materials. In 2010-11 financial year, total amount of export was 12,0000,000/-US$, which is 23.52% less than its same previous year. In this year (July-October 2011) export earning was US$ 329,000,000/ against the target US$388,000,000/-which is 30.80% less than same previous year, point to point.
Meanwhile, during the crisis period the factory association requested government to act as the cost was increasing wayward! So, the raw material that is waste-cotton price per pound was fixed at US$4.60, which was US$2.20; moreover 25% export tax was imposed to discourage the exporters. Again in September internationally the waste-cotton price decreased that affected the local market positively.
Dilemma is- the producers cannot increase their products selling price though the raw material price increases. Normally the buyers fix up the price with calculating the cost of manufacturing and raw material price, plus the competitive market force. So, it is mostly a buyers’ market, sellers follow- cannot dominate or dictate.
Alike garments industries, terry towel sector also gets the government promotional packages i.e., 5% cash incentives, but manufacturers demand 10-15% cash incentives. Moreover, this sector should be segregated from the garments sector, plus uninterrupted power, gas supply along with waste-cotton supply could make the sector more fluent and successful.