Cos step up to halve imports of man-made fibre raw materials by Jan 2024

Infographic: TBS

As investors step forward to bolster the production of the primary raw materials for man-made fibre (MMF) textiles, footwear, and various other products within the country, there's a noticeable reduction in import dependence. Industry insiders are optimistic about the possibility of halving the import dependence by next January.

Currently, a handful of companies produce these raw materials and over 90% of the local demand for them – which presently stands at 880 tonnes per day – is met through imports, according to the Bangladesh Textile Mills Association (BTMA).

In this situation, Chattogram-based Modern Syntex Limited, a subsidiary of the TK Group, is set to make a significant contribution by initiating the production of two essential raw materials: polyester staple fibre and polyethylene terephthalate (PET) chips. Their production will commence this November on a small scale and expand to full-scale production by January 2024.

Additionally, the company plans to manufacture drawn textured yarn and polyester fully drawn yarn using its own PET chips.

Shafal Barua, general manager of Modern Syntex, told The Business Standard, "Our production is slated to start in November. With other producers in the market joining in, we anticipate meeting nearly half of the demand by early next year."

He emphasised that this initiative is expected to save Bangladesh approximately $65 million per year and improve lead times, contributing to the country's competitiveness in international trade.

Within the TK Group, two other companies, Modern Poly Industries Limited and Super Synthetic, are already market leaders in the production of two of the four primary raw materials for MMF. Additionally, Bengal Synthetic and a company of the Noman Group produce small quantities of drawn textured yarn, and fully drawn yarn.

BTMA President Mohammad Ali Khokon expressed his perspective, saying, "If local companies can supply raw materials such as polyester staple fibre and PET chips, it will undeniably have a positive impact. It will save foreign exchange and enhance lead times."

He also emphasised the importance of competitive pricing, stating, "The ability to offer these products at competitive rates is crucial."

Another textile mill owner noted that while the demand for man-made fibre garments is on the rise, Bangladesh still lags behind in this aspect. The availability of locally supplied raw materials could create opportunities for Bangladesh to secure more orders in the future, as buyers' confidence will grow.

The garment sector accounts for 84% of the country's overall export earnings.

According to the Export Promotion Bureau (EPB), Bangladesh's RMG exports to the world market were valued at approximately $47 billion in fiscal 2022-23.

Exporters estimate that about 20% of these garments were made from man-made fibres.

The global demand for MMF clothing is steadily increasing, with MMF and non-cotton garments representing over 70% of the global apparel market, as reported by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Once Bangladesh was 100% dependent on import to meet the local demand for MMF raw materials. Currently, about 50 textile companies in the country import polyester staple fibre, drawn textured yarn, and fully drawn yarn. They manufacture yarn from these materials, and supply them to local fabric manufacturers who sell them to RMG manufacturers.

However, these three raw materials, derived from petrochemicals, could not be produced domestically.

In recent years, a few companies were importing PET chips and producing drawn textured yarn, and fully drawn yarn with them, none of them went into the production of polyester staple fibre and PET chips as this required huge investment.

Modern Syntex Limited is situated in Bangabandhu Sheikh Mujib Shilpa Nagar of Mirsarai, Chattogram. During a recent field-level visit there, TBS spoke to top company officials who revealed their preparations and confirmed that experimental production work has commenced.

They also shared that the daily demand for polyester staple fibre in the country is 350 tonnes, and their company alone will be able to supply 60% of this demand.

Similarly, the demand for PET chips is at the same level, with the company poised to supply 30% of it.
 
Investment challenges

Entrepreneurs have pointed out that over 70% of the global demand for clothing comprises MMF clothing, yet Bangladesh has not invested adequately in its raw material production.

They explained that primary raw materials required, purified terephthalic acid (PTA) and mono ethylene glycol (MEG), have to be imported, as they are not locally produced. This reliance on imports necessitates a consistent supply of gas and water for the production of purified terephthalic acid fibre and PET chips. Moreover, establishing such facilities demands substantial financial investments.

Another critical challenge is the shortage of skilled labour. Additionally, there is a 5% value-added tax on the import of raw materials, which entrepreneurs consider a hindrance to their competitiveness in the market.

It is worth noting that among the TK Group's companies, only Modern Syntex Limited has invested a substantial amount, totaling $141 million.

Modern Syntex General Manager Shafal Barua expressed concerns regarding an uninterrupted supply of water in the future, despite having secured a gas connection.

The company anticipates employing approximately 1,500 workers, with 300 fresh recruits already in training at Modern Poly Industries Limited, another company within the TK Group, according to company officials.

In response to these concerns, Abdullah Al Mahmud Faruk, the project director of Bangabandhu Sheikh Mujib Shilpa Nagar, said, "The gas supply issue of the company [Modern Syntex] has been resolved. But we have not been given the demand that much water will be needed. The current provisions meet their requirements. Hopefully, there will be no difficulty in the future as well."