Denim exports await a rebound as orders peak

• International denim retailers and brands keen to source more from Bangladesh
• This is due to product quality and sustainable production processes
• To capitalise on these opportunities, some manufacturers are increasing their capacity
• Many suppliers are also expanding operations by establishing new offices in Bangladesh

International denim retailers and brands are keen on sourcing more from Bangladesh due to product quality and sustainable production processes, which indicates bright prospects for denim manufacturers after a short break in growth.

Exporters and their suppliers have said the global denim supply chain has been rebounding from the severe impacts of the Covid-19 pandemic and the Russia-Ukraine war.

To capitalise on these business opportunities, some manufacturers are increasing their capacity, and many of their suppliers are also expanding their operations by establishing new offices in Bangladesh.

These observations were made by exporters, as well as their chemical, accessory, and fabric suppliers, during discussions with The Business Standard at the Bangladesh Denim Expo held at the International Convention City, Bangladesh (ICC-B) in Dhaka on Monday.

Sharif Zahir, managing director at Ananta Apparels, one of the leading denim exporters with an annual turnover of more than $200 million, said they have booked orders to their full capacity until August this year. He added that buyers are coming to Bangladesh as the global market is gradually improving.

About a year ago, this exporter faced challenges due to a shortage of orders.

Sharif also said they are currently facing challenges due to sudden increases in their overhead costs following the wage hike, as well as increases in gas and electricity prices.

The manufacturer has been investing in new technology and automated machinery to improve efficiency and reduce production costs. Despite these efforts, it remains very challenging to make a business case.

Additionally, he said buyers are also increasing their product prices by 10 cents to 15 cents considering production costs; however, the adjustment will likely be applicable for the next fall seasons.

"If the global situation is not affected by any war, the orders will increase, and that will also create an opportunity to increase product prices," added Sharif Zahir.

Echoing him, Munir Ahmed, director at M&J Group, another leading denim exporter with an annual turnover of over $200 million, said they have also booked orders at full capacity.

The group manufactures denims for some premium brands, which always pay off their prices considering their costs.

"Increasing prices always depend on the negotiation capacity of manufacturers," said Munir.

During the expo, Sparrow Group Managing Director Shovon Islam said the global denim market size is about $95 billion with an annual growth rate of 5.5%. Bangladesh has an opportunity to increase its market share.

"As the leading denim exporter, the country will be able to reach over $10.5 billion in exports from the current $8 billion by 2030," he said. "The country has invested over Tk26000 crore in the backward linkage of the denim industry, with 40 denim fabric mills in the country."

Shovon, also a director at the Bangladesh Garment Manufacturers and Exporters Association, said, "Currently, the denim mills supply about 65% of fabrics, whereas earlier, it was fully dependent on imports."

Accessories, chemical suppliers also increasing capacity

Mahmudul Hassan (Sahad), head of business development at Cherry Button Ltd, a Chinese metal trim manufacturer in Bangladesh with an annual turnover of around $8 million, said the Bangladesh market has huge potential for growth. Referring to their own company's experience, he said that to seize the market opportunity, they invested here in 2019. Before that, they were importing from China.

Last year, their business growth was about 29%, he added.

"We are also investing $10 million to set up another factory at Adamjee Export Processing Zone, which will commence production within this year," he said.

The denim market is growing, said Muhammad Wahidul Alam, general manager of RNT (BD) Ltd, another chemical company.

Denim business has been growing in Bangladesh for three reasons, including low price, quality, and high capacity, he added.

Local millers are adopting new washing and dyeing technologies here to reduce the water used in the washing of denim fabrics.

For instance, many of the denim millers use seven to eight litres of water to wash a kilogramme of fabric, which was nearly 350 litres earlier, the trader said.

Alam also said his business has been growing by more than 15% because of higher demand from the millers.

Some challenges in the market

The global denim supply from Bangladesh is at its peak, with many customers already cautious that they have reached the maximum level of sourcing from the South Asian country.

Sharif Zahir said some retailers have already implemented strategies to reduce dependency on a single country, relocating their sourcing to mitigate their risks.

On the other hand, some local manufacturers are also investing in increasing their production capacity due to a lack of knowledge of the market, which also creates another challenge, he added.

On the other hand, Chinese fast fashion retailer Shein has become a challenge for other retailers because they can offer denim at $4-$5 in the USA market due to their lack of traceability in their supply chain. No one knows from which factory Shein manufactures its products.

Automatically, people go for the cheaper products; the first fashion becomes challenging; how the business is sustainable, he questioned.

More than 60 exhibitors from 11 countries, including Bangladesh, India, China, Pakistan, Turkey, Italy, France, Spain, Switzerland, Vietnam, and Japan, are participating in the two-day show.

Exhibitors are showcasing their latest innovations, from sustainable fabrics to cutting-edge designs, highlighting the diversity of the denim industry. 

The theme "reimagine" means re-envisioning the industry, driven by relentless innovation and the seamless integration of digitalisation, the organisers said, adding that together they can reshape the denim landscape and embrace the power of technology.

Four panel discussions and two seminars will take place during the two-day event on issues including digital product passports, denim product development, and second-generation apparel entrepreneurs.

Kutubuddin Muhammad Jasim, who goes by the name Jasim Uddin is a Special Correspondent at The Business Standard. His areas of expertise are trade and private sector investment, labour rights, labour issues, sustainability, and revenue policy (Vat, Tax and Customs). He can be found at [email protected]