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Private millers are looking to utilise much of their capacity to increase the production of jute goods to cash in on the void created in the domestic and international markets for the closure of all the 22 state-run jute mills.
State mills under the Bangladesh Jute Mills Corporation (BJMC) exported 31,730 tonnes of jute goods in the first 11 months of fiscal 2019-20, up from 29,450 tonnes in the previous year.
As the BJMC factories that produced sacks, hessian and carpet backing cloths were shut on July 1, private millers see business prospects since state mills are unlikely to resume production soon.
“This has created an opportunity for the private sector players to turn around,” said Mahmudul Huq, chief executive of Janata Jute Mills, one of the leading private mills.
The mills under the BJMC had nearly 11,000 looms and the state agency could operate only half the looms to make jute goods.
The BJMC exported roughly one lakh tonnes of jute goods annually over the past decade, while its average domestic sales were more than 28,000 tonnes.
Private mills will not be able to fill the gap overnight, said Huq, who has been in the jute industry for nearly 30 years.
“Our capacity for weaving and spinning will increase by 2021,” he said.
Bangladesh has 260 private jute mills, including spinning mills, and 54 of those are closed, according to data by the Bangladesh Jute Spinners Association (BJSA), whose members contribute to more than 60 per cent of the total export receipts.
With the BJMC’s 22, the total number of factories shut down so far crosses 100.
Some private millers expressed optimism that the owners of the closed mills might resume production because of the shutdown of mills under the BJMC that is going to bid goodbye to 24,886 permanent workers through a golden handshake.
“Those who had been running factories below their capacity are likely to increase capacity utilisation,” said Mohammed Mahbubur Rahman Patwari, chairman of Bangladesh Jute Mills Association (BJMA).
BJMA data showed that private jute mills operate only 5,215 of their installed looms of 16,000 including the ones of the closed factories.
Many owners could not run their mills failing to keep pace with ‘unfair’ competition with the BJMC, which sold goods in the international market below the production cost, Patwari said.
Mill owners having other businesses could only survive in the jute industry, he said.
“Now the market will see competition. All will sell products at least at their production cost,” said Patwari, also the managing director of Sonali Aansh Industries.
Millers are getting good prices, said GL Modi, chairman of Uttara Jute Mills.
“The market for our products has improved. We will see what decision the government would take on the resumption of the closed mills.”
While it is not possible to increase capacity overnight, all mills are likely to operate in full capacity after Eid-ul-Azha, he said.
“We are also trying to increase production in our mills,” said Modi, who runs two jute mills with 550 looms.
The jute industry will grow as the closure of the mills under the BJMC is an opportunity for them, said BJSA President Md Zahid Mia.
“We are increasing production in our composite mill. In the past, we could not utilise our capacity and paid attention to making yarn spinning,” said Miah, managing director of Karim Jute Spinning Industries, which has a sister concern named Jobaida Karim Jute Mills.
“Jute industry will grow further for diversified use of jute. Jute is used in the automobile industry. There is also a big market for shopping bags,” he said.
Patwari, responding to sluggish export growth of traditional jute goods, said the market for jute products will not be as big as the market for plastic items in terms of value.
“But it has some advantage over plastic products in some areas such as carpet manufacturing. Plastic bags are costly from the environmental point of view. There will be a niche market for jute. It will be enough for us if we can nurture that market with proper strategies,” he said.
The private sector mills could not attain much growth in the past partly because of the BJMC’s faulty pricing of jute goods and sluggish demand in the global market, said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue.
Production in the existing jute mills is likely to increase, he said, adding that an opportunity has been created for a competitive environment in the market.
However, MA Raihan, director of Nowapara Jute Mills, said modernisation of mills is required to enhance production and reduce cost.
(TDS)
