Diversification of Man-Made Fiber (MMF) to Implement Circular Fashion Lifecycle

Originally published on the LightCastle Partners website.

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The Fiscal Year (FY) 2024-25 budget for Bangladesh has been prepared amidst ongoing economic challenges, proposing a total allocation of BDT 7,970 billion (around USD 66 million) [1]. Concurrently, the government has set an ambitious new export revenue projection of USD 110 billion by 2027, as outlined in the export policy for 2024-27 [2]. Achieving this ambitious target requires urgent attention from ready-made garments (RMG) industry leaders as they strategize to boost apparel exports and maintain sector competitiveness in the global market. However, Bangladesh’s RMG sector has faced a decline in export growth since the beginning of 2024, particularly from major buyer countries.

One contributing factor to this decline has been the shifting trade policies in these markets. For instance, changes in U.S. trade policies and tariff structures have likely influenced export dynamics with Bangladesh.

Simultaneously, the EU’s stringent green regulations and due diligence requirements have put additional pressure on Bangladesh’s export competitiveness [3]. As a result, exports to the EU dropped by 9.85% between January and April, while exports to the USA fell by 14% during the same period, raising serious concerns for industry leaders.

As the RMG industry becomes increasingly saturated with cotton-based apparel production, it is crucial for manufacturers to diversify into non-cotton-based apparel, particularly man-made fiber (MMF), to retain Bangladesh’s position as the second-largest RMG exporter in the global market.

The demand for MMF-based clothing is growing worldwide, driven by a focus on recyclable raw materials and high-value-added apparel. This makes diversification essential for Bangladesh’s export basket. Additionally, Bangladesh has to align with upcoming EU regulations, such as the EU Green Deal framework and the Eco-design for Sustainable Products Regulation (ESPR). These regulations are prompting global apparel brands to shift towards sustainable initiatives, boosting the use of recycled inputs and encouraging suppliers to incorporate environmentally friendly materials in their production.

Adopting such practices facilitates a closed loop within the apparel lifecycle, promoting circularity by ensuring resources are continuously reused or recycled into new garments.

This approach significantly reduces waste and diminishes reliance on virgin materials, helping Bangladesh meet its export targets and comply with international sustainability standards.

Global brands are increasingly integrating recycled raw materials into their production processes. By adhering to these sustainable practices, apparel producers are incorporating environmentally friendly raw materials that require less water and energy.

This shift includes focusing on man-made fibers (MMF) as part of sustainable raw materials for apparel producers. A key reason for MMF’s global ascent is its higher sustainability performance compared to cotton.

The Imperative to Integrate MMF in the Production Process

Diversifying into various categories of fibers enables manufacturers to achieve a balanced production mix without overburdening a single material. With this diversification in mind, suppliers are increasingly incorporating man-made fibers (MMFs) into their production processes due to their superior recyclability.

Focusing on MMFs is crucial as it supports the implementation of a circular economy model. This model extends the apparel life cycle and reduces the carbon footprint by 1.5 kg compared to using cotton across the value chain [5].

MMF demonstrates lower water consumption and carbon emissions in comparison to cotton fibers. This increasing popularity of MMFs is helping exporters prepare for upcoming sustainability compliance regulations. Leading MMF-supplying countries like India and Vietnam are significantly ahead of Bangladesh in incorporating MMFs into their apparel production processes.

The recycling potential of man-made fibers (MMFs) offers a significant advantage for apparel manufacturers, enabling them to incorporate non-cotton raw materials into their production processes.

This shift allows apparel leaders to capture a larger market share in the global apparel market. Consequently, in 2021, global exports of man-made and blended apparel reached USD 271 billion, surpassing cotton exports, which stood at USD 219 billion. Over the past decade, the relative significance of cotton garments has declined, while apparel made from man-made fibers has more than doubled [5].

Global Landscape in the Production of MMF

The growing global population also presents a significant challenge for the apparel industry. The United Nations estimates a population of 8.1 billion by 2025, leading to a substantial rise in food consumption.

This, in turn, is expected to put a strain on arable land, potentially limiting the availability of natural fibers like cotton. In response to this looming resource scarcity, the share of natural fibers in the apparel industry has declined from 41% to around 27% in 2020. This shift is driven by changing consumer preferences, as people worldwide become more conscious of the environmental impact of the fashion industry.

Consumers increasingly prefer garments made from eco-friendly raw materials to reduce carbon footprints and minimize the use of virgin materials.

In response to this looming resource scarcity, the share of natural fibers in the apparel industry has declined from 41% to around 27% in 2020. This shift is driven by changing consumer preferences, as people worldwide become more conscious of the environmental impact of the fashion industry. Consumers increasingly prefer garments made from eco-friendly raw materials to reduce carbon footprints and minimize the use of virgin materials.

Producers are aligning their production processes with these consumer preferences, prompting suppliers to shift towards more non-cotton apparel, particularly MMFs. These fibers are favored for their durability, versatility, and ability to blend with other materials to create innovative fabrics.

Over the past five years, non-cotton fiber production has grown at a compound annual growth rate (CAGR) of 2.5%, in contrast to a -1.4% CAGR decline in cotton production [6].

The global fashion industry is facing a pressing need for sustainable practices, and international brands are leading the charge in promoting a shift towards recycled man-made fibers (MMFs), particularly recycled polyester.

This strategic move capitalizes on the inherent recyclability of MMFs, offering a significant advantage over natural fibers like cotton and wool when it comes to post-consumer life. Recycled polyester, primarily derived from PET bottles, offers a compelling alternative to virgin polyester.

Reusing PET bottles to create recycled polyester for garments embodies the circular economy principle within the fashion industry, with approximately 99% of recycled polyester feedstock made from PET plastic bottles.

Traditionally, garments made from virgin polyester rely on new petroleum resources. By diverting used PET bottles for clothing production, dependence on fossil fuels is reduced, and the overall carbon footprint is lowered, implementing circular practices within the textiles value chain.

But the innovation doesn’t stop there; international brands are actively exploring the potential of other post-consumer plastics like ocean waste and packaging scraps, alongside pre-consumer waste like fabric offcuts. This closed-loop system keeps plastic waste out of landfills and oceans, preventing pollution and environmental damage.

Recognizing the immense potential, leading brands like Adidas, H&M Group, and the Inditex Group have joined forces to significantly increase the use of recycled polyester in garments. Their ambitious target of 45% by 2025 is just the first step, with an ultimate goal of reaching 90% by 2030.

Among global brands, Nike took the initiative to make India’s national cricket team jerseys from recycled polyester. Similarly, Adidas made the jerseys for the Indian team entirely from recycled polyester [7]. By utilizing recycled polyester for these jerseys, India is harnessing the inherent environmental benefits of synthetic fibers like polyester.

Navigating the Footsteps of the Peer Economies

Vietnam

Vietnam’s “Strategy for the Development of Vietnam’s Textiles and Clothing, Leather and Footwear Industries to 2030, with a vision to 2035” emphasizes moving towards higher value-added products within the textile and garment industry.

MMFs are often used in technical textiles, functional apparel, and activewear, which tend to have higher profit margins compared to basic cotton garments. Increased demand for these products could stimulate domestic MMF production to meet those needs [5].

The government of Vietnam (GoV) is planning to establish specialized industrial parks centering on textiles and clothing, making it an attractive destination for factories to set up, encouraging domestic production of MMF along with foreign direct investment (FDI) in their economy.

India

India has been incentivizing new start-ups in the textile segment to boost private investment in the economy, allocating research grants of up to USD 59,904.50 (50 lakh rupees) specifically targeting startups and individuals working with technical textiles [8].

Moreover, India is heavily promoting the production of man-made fibers (MMFs) through its ‘Make in India’ initiative, which includes revoking anti-dumping duties on purified terephthalic acid (PTA), viscose staple fiber (VSF), and acrylic.

This initiative encourages domestic manufacturers to integrate MMFs into their production processes and increase production capacity, as evidenced by India’s use of MMFs in their national cricket team’s jersey production.

As the data depicts, India experienced a robust rise in its compound annual growth rate for man-made filament yarn (MMFY) by 9.2% in 2021-22. This indicates a rising demand for MMFY, which translates to increased production of polyester, viscose, and other synthetic apparel.

Strategically capitalizing on this trend, India has allocated USD 1.28 billion (10,683 crore rupees) to implement a product-linked incentive (PLI) scheme [10]. This scheme provides incentives to firms based on their incremental revenue over five years and is designed to boost economies of scale in the MMF-based textiles and apparel segment. The initiative also aims to generate more employment in the economy.

Exploring the Potential of MMF Production in Bangladesh

As Bangladesh nears its graduation from the Least Developed Countries (LDC) category, the diversification of the ready-made garments (RMG) sector becomes increasingly crucial. This transition signifies notable development progress, but it also means losing preferential trade benefits associated with LDC status. Without these advantages, the RMG industry’s heavy concentration on specific product lines could threaten its position in the global apparel market, weakening its ability to negotiate competitive prices with global brands.

Price Disparities in the Global Market

The price disparity between Bangladesh and other competing countries is concerning. For instance, Bangladesh receives lower prices for its cotton-based apparel compared to its peers. Peru receives 83% more for men’s cotton shirts, while Thailand secures 79% higher prices for women’s cotton jackets than Bangladesh. In 2020, men’s woven cotton trousers from Bangladesh were sold for USD 7.01 per piece, which is 9.20% below the global average of USD 7.72 [12].

To help RMG leaders negotiate for higher prices, Bangladesh is diversifying its production basket. The share of man-made fibers (MMF) increased from 21.8% in 2021 to 28% in 2022, catering to the growing demand for sustainable clothing in major buyer destinations.

Navigating Production Diversification

To facilitate fiber mix diversification, RMG manufacturers are strategically navigating their production processes. They aim to move up the value chain and expand their product lines. Industry leaders are incorporating MMFs into their production, following examples set by peer nations, to deliver high-value-added products such as blazers, denim wear, and activewear. These products command higher prices in the global market due to their technical properties and enhanced market value.

Growth of MMF-based Apparel in Bangladesh

Note:

The growth of MMF-based apparel is evident. Woven dresses for women, for example, grew at a compound annual growth rate (CAGR) of 27% from 2017 to 2022. This indicates that Bangladesh is diversifying its apparel product line beyond cotton to include MMF production for value addition. Woven dresses, in particular, hold a higher value than knitted dresses, making them a strategic focus for RMG exporters aiming to produce high-value-added products.

In line with the previous Export Policy for 2021-24, which emphasizes high-value products like men’s and women’s blazers, leather jackets, and MMF items, Bangladesh has actively invested in MMF-based suits and blazers (HS Code 620333), achieving a CAGR of 20% in 2022 [14]. This targeted investment demonstrates the sector’s commitment to tapping into the potential of MMF and achieving product line diversification within the RMG sector.

Government Support and Foreign Collaboration

To enhance the MMF backward linkage, Bangladesh is collaborating with Chinese engineering firms to locally manufacture PET and PSF chips. Furthermore, the recent FY 2024-25 budget saw the government reduce import duties on MMF raw material polypropylene yarn from 10% to 5% to support local carpet manufacturing industries. This reduction will also aid textile and RMG manufacturers in producing sportswear, undergarments, and medical gowns locally.

Through ongoing collaborations with Chinese engineering industries, Bangladesh can integrate updated technology and transfer skills to bolster the production of MMF-based garments. The formation of joint ventures with international brands and retailers facilitates foreign direct investment (FDI) within the country. FDI has the potential to catalyze transformative outcomes, such as increased exports and seamless integration into the global value chain (GVC). Consequently, these collaborations can empower RMG factory owners in Bangladesh to leverage their global reputation, enabling them to negotiate higher unit prices for export items.

Way Forward: Exploring Other Non-Cotton Raw Materials

While diversifying Bangladesh’s apparel exports by incorporating man-made fibers (MMF), it is crucial to recognize the associated environmental concerns. Although MMF materials like polyester and viscose reduce carbon footprints and address the issue of fast fashion due to their durability, they are predominantly made from non-renewable resources. These materials, while durable, are also non-biodegradable. To mitigate over-reliance on a single type of raw material, it is essential to integrate other non-cotton materials such as wool and silk into the production mix.

Potential for other non-cotton materials

In 2022, Bangladesh achieved the highest market share in the outerwear category of non-cotton apparel, capturing 38% compared to other leading nations. This category includes suits, blazers, and coats, among others, made extensively from MMF, wool, cashmere, silk, and other non-cotton fabrics. Despite this achievement, the country’s share of exports across the upstream non-cotton value chain remains minimal, with the overall non-cotton apparel export share at just 5% in 2022.

Diversifying into other non-cotton raw materials allows RMG manufacturers to expand their market reach. For instance, in 2022, Bangladesh successfully exported its non-cotton apparel to destinations, European Union (EU), France, Germany, and Spain, as well as the USA.

Exploring the potential of wool and silk fiber

Among various fiber types, wool and silk have a lower environmental impact compared to cotton, which requires significant water resources and pesticide use. Wool and silk are derived from animals and do not require large-scale land cultivation. Both fibers are naturally biodegradable, unlike synthetic MMFs derived from fossil fuels, which can take centuries to decompose and contribute to microplastic pollution.

Wool is used to make high-value apparel, including suits, shirts, pants, and knitwear sweaters for export. Recycled wool holds a 7% market share in the global apparel industry, following recycled polyester. To boost the market for wool-based products, industry leaders in Bangladesh plan to import wool from Uruguay, in addition to Australia and China. Importing wool from Uruguay would enable industry leaders to explore the Mercosur market, a trade bloc that facilitates the free movement of goods, capital, and services among its member countries, thereby expanding the consumer base to include Brazil, Argentina, and Paraguay.

Building Diplomatic Relationships for Market Expansion

Furthermore, a bilateral free trade agreement is being drafted with Uruguay to build a diplomatic relationship that will allow Bangladesh to enjoy tax reductions or reduced duties on exported items.

By focusing on other non-cotton fibers, particularly those with high value-added potential, the industry can achieve a two-pronged approach: diversifying fiber production and exploring new market destinations to strengthen its position within the existing market.

Author

This article was authored by Sadia Karim, a Business Analyst at LightCastle Partners. Advisory and editorial support was provided by Samiha Anwar, Senior Business Consultant at LightCastle Partners. For further clarifications, contact here: [email protected]

References

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3. Bangladesh RMG exports to USA decline by 14% in Jan-Apr 2024 amidst growing challenges | Textile Focus (2024)
4. Closing the loop: Increasing fashion circularity in California. (2021). Mckinsey and Company.
5. Upscaling the RMG Sector (2024) | RAPID
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8. Government announces up to Rs 50 lakh grant for startups to promote technical textiles (2023) | The Economic Times
9. AR_Wazir-Advisors-Annual-T_A-Industry-Report-2023
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