Monday, 15th July, 2024
Monday, 15th July, 2024

$6.6m RMG orders gone as second wave hits Europe

Manufacturers claimed that international buyers had reduced order placements, prompting Bangladeshi factories to run at half their production capacity. Picture: Mumit M/TBS

With collapsed apparel demands owing to the Covid-19 second wave in Europe, three international buyers have cancelled and held up orders worth $6.6 million this month.

The buyers are Swedish retail giant H&M, French sporting goods retailer Decathlon, and Irish retailer Primark, according to officials of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“Some seven factories have reported order cancellation on the association’s portal so far. They have reported $1.97 million in order cancellations and $4.63 million in suspension,” said a top BGMEA official.

He said the BGMEA had launched the web portal last week to track the order cancellation situation in the wake of the second wave of Covid-19 striking the European Union (EU) member countries.

Ziaur Rahman, H&M’s regional head for Bangladesh, Pakistan and Ethiopia, however, said, “We did not cancel any orders in Bangladesh.”

He told The Business Standard that if the brand cancels any quantity of orders for whatever reasons, it will pay the full liability as it did before.

“In some cases, we asked our suppliers to hold shipments for two weeks as some European countries have gone under lockdown,” Ziaur said. “We are planning to ship those goods to other countries.”

H&M also increased the amount of garment production in Bangladesh after the first wave of Covid because Bangladesh is a comparatively preferred sourcing destination, he said.

“However, currently every buyer is very consciously placing new orders as European markets are under lockdown,” the brand representative added.

During the first wave, the association did the same thing, with cancellations and order withdrawals amounting to about $3.18 billion at the time.

When the first wave hit, H&M announced that it would not cancel any order placed with Bangladeshi apparel makers. It buys clothes worth about $3billion a year from Bangladesh, which is about 10% of the country’s apparel exports.

Manufacturers claimed that international buyers had reduced order placements, prompting Bangladeshi factories to run at half their production capacity.

At the same time, they also faced a drastic fall in product prices compared to the corresponding month last year, with the average price shrinking rate being 5.6%.

Leading apparel suppliers and buyers’ representatives said a number of buyers had halted order placements for up to six weeks. In some cases, they also cancelled some orders.

Mesbah Uddin Khan, managing director of Windy Group, said one of the leading European buyers had halted order placements since 18 October as their country was under a lockdown due to the second wave. “Now it has resumed order placements, but the quantity is very low.”

He said another EU brand had also stopped order placements due to the second wave but the orders might resume by 20 December as their lockdown would be over by then.

The entrepreneur said, “We already have order shortages.The situation may increase our sufferings in trying to run production units from the middle of next month.”

“We do not know how we will manage workers’ wages and other payments in the coming days,” added Mesbah.

Some British buyers had also suspended order placements and halted delivery of ready goods, manufacturers said.

Mostafiz Uddin, managing director of Denim Expert Limited, said, “The trend of order placement varies according to buyers’ nature. Some of our orders have been halted by a buyer based in the UK, but no buyer has cancelled any order. Buyers in the UK are delaying delivery orders by an average of four weeks.”

Ananta Apparels Managing Director Sharif Zahir echoed Mesbah and Mostafiz, saying every buyer had asked that some orders be halted as a number of EU countries were currently under lockdown.

Those brands have shut down their physical stores and some of them are also cancelling orders, he added.

Apparel suppliers would face a tough time in business if the second wave continued for a long time, Sharif feared.

Siddiqur Rahman, former president of BGMEA, said, “Some buyers like Primark, C&A and Inditex have already stopped new order placements.In some cases, they have cancelled orders.”

Order placements had been stuck for the last two weeks as some orders had already been halted and buyers had also stopped placing new orders, said Md Fazlul Hoque, managing director of Plummy Fashions Ltd, the world’s greenest knitwear factory.

At a time when manufacturers are hoping for recovery, the second wave has disrupted everything, he said. “If the pandemic situation in the countries of our Western buyers does not improve, our situation will worsen.”

There have been discussions in the market on order placements and cancellations since the second wave began in the EU, but it depends on the relations between suppliers and buyers as well as their confidence level, said MA Jabbar, managing director of DBL Group.

“Since October, we have observed that buyers are more cautious about placing new orders. Now they are gradually coming back to the market and are placing orders in small quantities,” he said.

So far, manufactures have been under some pressure to run their production units, said Jabbar. “The uncertainty will be over after a sufficient supply of Covid-19 vaccines reach the market.”

Rezwan Selim, director of BGMEA, said the amount of orders had gone down to almost half the production capacity of factories and some entrepreneurs might run their units till mid-December.

However, almost every factory will suffer from January onwards due to order shortages, he added.

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