Exports of jute and jute goods from Bangladesh declined in the last fiscal year 2021-22 due to unprecedented spike in shipping costs and higher price of raw fibres.
Container freight cost rocketed nearly 10 times to $10,000-$15,000 from $1,000-$1,500 since the pandemic began.
This means if the price of a container full of products is $40,000, the total costs, which include the freight charges, come at $50,000.
Jute millers fetched $1.13 billion by selling jute and jute-made products in the fiscal year that ended on June 30, down 2.91% year-on-year, data from the Export Promotion Bureau (EPB) showed.
Earnings from the main exportable yarn and twine dipped 12.67% to $697.80 million.
Jute yarn accounts for two-thirds of the export earnings from the sector, EPB data showed.
The product is used in carpets and Turkey is the main buyer for yarns produced in Bangladesh.
Higher prices of raw jute in the local market is driven largely by market manipulation by middlemen, meaning exporters can’t remain competitive in the international markets when they have to buy the raw material at higher costs.
Exporters said that a fresh blow for the industry came several months after export receipts hit $1.16 billion in FY21, the highest on record, driven by a higher price of raw jute and an increased demand.
According to millers who produce yarn, twine, bags, sacks and other jute goods for mainly export markets, buyers reduced orders as the price of the natural fibre hit a historic high of more than Tk5,000 per maund in February this year owing to the stockpiling by the middlemen and a decline in production of the crop last season.
Usually, raw jute is sold at Tk2,500-3,100 per maund, especially during the harvest period.
Jute sack and bag makers were the hardest hit as their shipment fell 14% year-on-year to $119.23 million in FY22.
Amid declining export volume, the government has extended a 20% cash incentive for the shipment of diversified jute products such as food-grade bags, clothes, yarns, and twines.
Exporters have to ensure the use of the natural fibre equivalent to at least 50% of the export price, said the central bank in a notice recently.
The cash incentive for hessian, sacking and carpet backing cloth is 12%.
Farmers in Bangladesh have grown roughly 8 million bales of jute annually over the past five years.
Plans set for direct jute export shipping to Europe, UAE
Direct shipping to Europe and the United Arab Emirates (UAE) from Bangladesh’s Chittagong port is being planned for export of jute and jute goods to overseas markets.
Officials said that the government also wanted to enhance supply of required containers to facilitate the carrying of the traditional natural fibre to the aforesaid destinations en route to global markets.
The Ministry of Shipping has convened an inter-ministerial meeting for July 21 to discuss the measures that can be taken.
Representatives from the National Board of Revenue, foreign, commerce, and jute ministries, chairman of ports and other stakeholders from jute and jute goods association, and ship owners have been invited to the meet.
The officials said that Bangladesh was eager to start direct shipping service with the UAE.
On a recent visit there the foreign minister expressed Bangladesh’s willingness to start the service as soon as possible to transship goods from there to Europe and America.
Bangladesh usually exports goods using transhipment ports in Singapore, Colombo, Port Klang and Tanjung Pelepas in Malaysia.
Some European ship-liners have already introduced direct shipping connecting Chittagong port, which has cut down travel time and cost both.
Now Italy, Rotterdam, and Liverpool are among the European cities and states which are connected to Chittagong directly while work is underway to connect some more cities.
