RMG purchase order increased, prices decreased
Published: 22:20 9 August 2020 Updated: 22:21 9 August 2020
RMG purchase order increased, prices decreased
After overcoming the coronavirus epidemic, the country's garment factories have started to receive more purchase orders. However, there have been some complications with the price of clothes. Most buyers want to pay less than usual for all types of outfits. Again, some of the traders say, many are reducing the price of clothes on their own to keep the buyers in hands amid this crisis.
Traders say the situation is slowly returning to normal in European-American buyers after the coronavirus pandemic. As a result, factories have started getting regular purchases order from buyers. However, buyers want to pay much less compare to other times for clothes. As a result, even if a ready-made garment factory is started, those concerned in the sector fear that the profit register will be zero. In many cases, the losses have to be counted.
According to various research institutes and traders, 30 to 35 percent of the garment sector's export earnings go to back-to-back LCs or to meet the cost of importing raw materials and capital equipment. While 4 to 5 billion dollars are spent to pay salaries and allowances of foreigners working at the mid-level of the factory. Excluding these expenses, the remaining 55 percent is added to the country's economy.
It is learned that Swedish buyers H&M canceled most of their orders during the lockdown from March to May this year. Now they want to pay less than the value of the time ordered. At present all other buyers are also placing orders. However, they want to make clothes at 5-15 percent less than before. In some cases, this cost is much lower than the cost of production. In such a situation, the garment exporters said that the manufacturers are being forced to accept the purchase order thinking of their workers during the epidemic.
According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), orders from readymade garment exporters have declined by 35 percent of their production capacity for the August-December period and an average of 14 percent in price drifts.
BGMEA co-president Arshad Jamal Dipu said garment manufacturers consider October to February as the season. Factory work is usually relatively low from August to September due to a shortage of orders. However, several top clothing brands have already announced that they will place new orders with clothing suppliers during the epidemic. Order bookings will be better by September if the global epidemic situation improves, he said.
According to denim exporters, about 50 to 60 percent of their production capacity is in order in August and September. A top official at Sasha Denim said they had forecast a 15 percent growth in the just-ended fiscal year, but their accounts had changed as a result of the epidemic. He said there are almost the same numbers of orders as in the last financial year. However, this time the next two quarters are less likely to grow. They hope that their business will return to a positive trend from the third quarter of the current financial year if the epidemic situation improves.
Mohammad Hatem, managing director of MB Knit Fashion Limited and first vice-president of BKME, said he had booked an order for 3.5 million units of T-shirts from a US buyer for just 1.22 dollars. Despite having 100 percent production capacity, it has only 30 percent capacity orders until October.
According to denim textile sources, imbalanced competition among exporters to reduce prices is one of the reasons for lower prices. In this situation, they demanded to fix the minimum price on the basis of different categories during the epidemic. Meanwhile, India and Cambodia have set minimum prices for their products, they said.
The current situation is affecting everyone from retailers to suppliers, said a director of Denim Export Ltd.
As per the 2018 agreement, the wages of garment workers were increased by 51 percent, and the buyers were committed to increasing the prices of the products. So the factory owners hoped that the buyers would pay the fair price according to the rules. But because of the COVID-19 pandemic, all reckoning has changed. The country's readymade garment exporters are going to face losses as buyers do not pay the fair price.
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