They also said their profit margin will drop significantly as most of buyers remained reluctant to compensate for the increased prices of cotton.
Cotton prices have shot to US$ 2.0 a pound for the first time and it is up by 171 per cent from a year back, prompting sharp rises in the prices of denims and other everyday clothing.
Many local spinning mills are facing severe working capital crunch due to the record surge in prices of raw cotton. The cotton prices rarely traded higher than $ 1.0 dollar a pound over the past three decades.
Ashraful Hassan, managing director of Grameen Knit at Dhaka EPZ said the leading knitting factory will lose on the deals signed one or two months back.
Since January the cotton prices have risen more than 40 per cent because of soaring demand from China, poor cotton harvest in Pakistan and export restriction in India, leading to an acute supply shortages.
Mr Ashraf said: "The prices of 30-single combed yarn was $ 6.0 a kilogramme during letter of credit period, but it is now over $7.0."
"The buyers are not compensating for the deals signed in December and January period at lower prices," Mr Ashraf added.
He said they have incurred losses between 5.0 and 20 per cent for the orders taken in January or earlier, adding: "Now we are signing contracts carefully."
Sweater and denim manufacturers said their profit margins are dropping fast amid the soaring prices of yarns.
Hemayet Hossain, deputy managing director of Pioneer Sweaters, a subsidiary of Badsha Group, told the FE: "Rise in the prices of yarns and wage hikes of workers has led to the poor profitability of apparel exporters."
Hemayet said the prices of 22/2 yarn rose by nearly 85 per cent over the past one month.
Mr Hemayet claimed that the buy-orders remained the same but prices for finished products are reducing, due to buyer's strong bargaining capacity.
Mustafizur Rahman, managing director of Chittagong Denims, a leading jeans producing company, said the prices of denim products rose nearly 40 per cent over the past one month.
Jahangir Alamin, president of Bangladesh Textile Mills Association (BTMA) said: "More or less, all spinning mills' owners are passing through their crisis period.
Bangladesh is the world's second largest cotton importing country followed by China. It imports more than 5.0 million bales for its 7.6 million spindles.
Salim Osman, president of BKMEA, however, urged the government to take measures so that the spinners could not raise the prices of yarns abnormally.
"Price rise of yarn should be proportionate. But many local spin mills cash in on price rise of cotton in the international market."
FE, Sun, 20/02/2011
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