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História

15 Jul 2024

Bangladesh: Garment industry facing crisis as global buyers reduce orders & demand low costs during energy crisis

Since 2022, Bangladesh has been struggling with a gas shortage, which intensified in May 2024 after one of the two LNG Terminals in Cox's Bazar’s Maheshkhali was damaged when cyclone Remal hit the coast of Bangladesh.

This has subsequently impacted manufacturing industries relying on the gas supply to keep their factories running, with load-shedding taking place, and many factories forced to reduce production capacity or rely on more expensive means to keep production going.

The garment industry has been particularly impacted by the crisis, with factories struggling to meet buyer orders and lead times, and reporting that their production capacity has declined by up to 40%. Garment manufacturers are having to reduce business size, with many failing to manage workers' salaries and repay loan instalments.

In response to the crisis, international buyers have reportedly been shifting orders, in one instance $50 million worth of orders, to other apparel-producing countries, such as Sri Lanka and India. This is corroborated by manufacturers who report facing up to 40% decline in orders.

It is further reported that buyers are offering low prices due to the ongoing global economic crisis and reduced sales in the West, that do not meet the increased production costs in Bangladesh, with production costs increasing by 20-33%, but global buyers demanding up to 20% lower prices. This has led to manufacturers failing to meet shipment deadlines and factories forced to turn down low cost orders.

It is estimated that in the last six months, the garment industry has lost around $5-7 billion in orders due to the crisis.

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