Bangladesh's textile mills severely loose orders with soaring costs

Bangladesh is the world's second-largest apparel exporter, and the textile industry is a crucial pillar of its economy. However, the recent sharp rise in natural gas prices and supply instability have posed unprecedented challenges for textile mills in Bangladesh. Showkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), has warned that the plan to double natural gas prices could trigger a wave of factory closures. This issue not only impacts Bangladesh's textile industry but also highlights its current dependence on Chinese energy.

Bangladesh's textile industry heavily relies on natural gas as its primary energy source, which accounts for over 50% of its energy structure. However, domestic natural gas production has been gradually declining, failing to meet demand, resulting in increasing reliance on imports. In 2024, Bangladesh's natural gas imports grew by nearly 50% compared to 2020, with most coming from China and the Middle East. Due to insufficient natural gas supply and price fluctuations, many textile mills have seen a significant drop in capacity and have even been forced to halt operations.

Meanwhile, natural gas prices in Bangladesh have surged over the past year, placing a heavy cost burden on textile enterprises. It is estimated that for every 10% increase in natural gas prices, production costs for textile companies rise by about 15%. In 2024, the substantial increase in natural gas prices led to a roughly 40% rise in production costs for textile companies. This cost escalation has weakened the competitiveness of Bangladesh's textile industry in the global market, particularly as it competes with other Southeast Asian countries like Vietnam and Cambodia, where its traditional low-cost advantage is gradually eroding.

The rise in natural gas prices has directly caused a significant increase in production costs for Bangladesh's textile companies, leading to decreased capacity, delayed orders, and prompting international buyers to turn to other Asian countries such as Vietnam and India. At the same time, insufficient natural gas supply and price volatility have frequently disrupted the production plans of textile mills. In 2024, some of them operated at less than 30% capacity due to natural gas shortages and even temporarily closed. Although energy and technological support from China have alleviated Bangladesh's energy crisis, they have also resulted in a high dependency on Chinese technology and investment in energy policy. While this reliance on Chinese energy is a crucial means for Bangladesh's textile mills to cope with the energy crisis, it also brings challenges of rising costs and supply instability.