(Reuters) – Apparel makers in Bangladesh are considering rare bulk exports by air to Europe and the United States, as they race to meet deadlines and avoid cancellations after a cyclone delayed shipments, caused power cuts and disrupted production.
The crunch could disrupt summer clothes supplies for retailers such as Walmart (NYSE:WMT), Gap Inc (NYSE:GPS), H&M, VF Corp (NYSE:VFC), Zara and American Eagle Outfitters (NYSE:AEO), some of Bangladesh’s largest export customers.
Cyclone Mocha, one of the strongest storms to hit the region in years, made landfall in neighboring Myanmar over the weekend, but left a trail of destruction that also has delayed businesses’ return to normal in Bangladesh.
Apparel shipments account for more than 80% of the country’s exports and are especially crucial now after its dollar reserves plunged nearly a third in the 12 months to end-April, hitting a seven-year low.
“We have to airlift goods now as we’re missing the shipping deadline,” said Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). “We don’t want to suffer losses or lose customers.”
Bangladesh, the world’s second-largest garment exporter, has already been hit by weakening global demand, with exports falling in both March and April.
Buyers generally bear the cost of shipping. However, when goods are airlifted, all transportation-related costs are borne by the manufacturers, hurting their already thinning margins, Hatem said.
Apparel makers, who directly and indirectly employ millions of Bangladeshis, export ready-made clothes to regions including Europe, North America, Japan and Australia. Air freight typically costs $8 to $10 per kg, according to industry players.
A large European buyer has asked one garment manufacturer to reduce delivered prices by 5% to account for the delay, an email reviewed by Reuters showed. Another garment owner who supplies H&M said some of his shipments had been delayed.
Power cuts in the last two months, first due to a scorching heatwave, and then the cyclone, have put more stress on apparel companies. Many factories are now running on power generators fueled by expensive diesel.
“If this goes on, it’ll be difficult to survive,” said Mohammed Nasir, owner of a garment factory in the Gazipur industrial hub, north of Dhaka.
Fazlee Shamim Ehsan, vice-president at the industry body BKMEA, said if goods cannot be delivered on time buyers either seek heavy discounts or threaten to cancel orders.
“Now there are also chances of missing orders for the next season, as we are struggling to provide samples on time due to the regular power cuts,” Ehsan said.
