The US-imposed tariffs on Indian textiles, initially seen as an opportunity for Bangladesh, have instead posed new challenges. Rather than benefiting from reduced Indian competition in the US, Bangladeshi textile entrepreneurs are facing an influx of cheap Indian yarn, sold at dumping prices, which has strained domestic spinning mills and unsettled the market.

Sector leaders said that India is exporting yarn to Bangladesh at much lower prices, intensifying competition for local producers. While producing one kilogram of yarn domestically costs about $3, the same quality can be imported from India for $2.60 per kilogram by sea.

Compounding the issue, some importers are reportedly misusing bonded facilities to bring foreign yarn into Bangladesh duty-free and sell it in the local market, further distorting prices and hurting domestic manufacturers, they said.

Over the past few years, Bangladesh's textile sector has faced mounting challenges. Political instability, economic downturns, gas shortages, high interest rates, and currency fluctuations have made operations difficult, forcing many small and medium spinning mills to scale down or partially halt production, increasing industry vulnerabilities.

Data from the Dhaka Stock Exchange (DSE) highlight the sector's ongoing challenges. Financial reports from listed companies show a mixed picture: while a few large firms have managed to maintain growth, the overall sector remains under significant strain.

According to DSE records, 58 textile companies are currently listed on the exchange, reflecting the industry's importance to Bangladesh's economy and export portfolio.

 Indian yarn dumping deepens the crisis

Md Saleudh Zaman Khan, vice president of the Bangladesh Textile Mills Association (BTMA) and chairman of NZ Denim Ltd, told TBS that while the gas supply situation has improved slightly over the last six months, the Indian yarn now represents the single biggest challenge.

"This price gap [between locally produced and Indian imports] makes it extremely difficult for Bangladeshi spinners to compete," Khan said, adding that the influx of cheaper Indian yarn steadily eroded the domestic mills' market share.

He further noted that India provides up to 10% export incentives to its yarn exporters across various segments, allowing them to sell yarn at even lower prices in Bangladesh. "The US tariffs were expected to create export opportunities for Bangladesh, but instead, domestic mills are now facing intensified competition from cheaper Indian imports," he added.

Saleudh Zaman also highlighted the shrinking incentive structure for local exporters. Companies that previously received 3-4% incentives for using domestically produced yarn now receive only 1%, prompting many exporters to turn to the more affordable Indian alternatives. Meanwhile, misuse of bonded facilities by certain importers, who bring in yarn and sell it locally, has further exacerbated market distortions and created instability in yarn prices.

"Spinning mills operate primarily on bank loans," Khan added. "With high interest rates and capital shortages, many mills have already defaulted on their loans. Weak factories are closing, and even stronger firms are gradually losing competitiveness."

Falling orders and capacity reductions

Razeeb Haider, BTMA director and managing director of Outpace Spinning Mills, said that the oversupply of Indian yarn has led to a substantial reduction in orders for many local companies. "Some mills have seen their orders fall by 20-25%, forcing them to shut down parts of their production capacity," he explained.

Haider further noted that a significant portion of local buyers' orders has shifted to India because Indian exporters can offer yarn at prices even lower than the production cost in Bangladesh. "This creates a severe competitive disadvantage for domestic spinners," he said.

Financial performance

Despite these challenges, several listed textile companies have recorded improved annual performance for FY25 compared to FY24. However, most firms have experienced significant pressure on a quarterly basis, particularly in the April-June quarter compared to January-March.

Envoy Textiles Ltd, the world's first LEED-certified green denim manufacturer, posted 135% year-on-year earnings growth for FY25. Nevertheless, quarterly results showed a slight decline: earnings per share (EPS) fell from Tk2.44 in January-March to Tk2.37 in April-June.

M Saiful Islam Chowdhury, Envoy Textile's company secretary, attributed earlier the strong performance to increased orders from international buyers, particularly in Europe and the United States. "Our strong brand reputation, compliance standards, and aggressive marketing strategy have provided us a competitive edge," he said.

Similarly, Square Textiles Ltd continued its growth both year-on-year and quarter-to-quarter, supported by increased yarn production from its new project in Gazipur. Other companies – including Matin Spinning Mills, Malek Spinning Mills, Hwa Well Textiles, and Far East Knitting – also reported year-on-year earnings growth, though most experienced some quarterly decline due to market pressures. Paramount Textile Ltd, a subsidiary of the Paramount Group, has yet to release its annual financial report.

 Future outlook: a sector at risk

Industry insiders warn that unless strict measures are taken to curb Indian yarn dumping, Bangladesh's spinning sector could face widespread bankruptcies, massive job losses, and even collapse of the entire textile value chain.

"The current trend is unsustainable," said one industry leader. "If the government does not intervene promptly, we may lose one of the most vital segments of Bangladesh's export industry, with serious implications for employment and economic growth."

Textile Industry / BTMA / DSE / stocks