Jute goods exports get the sack on global slump; economies taper off buying

A slowdown in global markets since the outbreak of the Russia-Ukraine war has taken the sheen off jute or the ‘golden fibre’ as it’s often referred to as.

 

Jute, which is 100 per cent biodegradable and therefore environment-friendly, has been reaping the benefits of a global push for sustainable packaging material.

 

Foreign retailers — including UK supermarket Tesco and Japanese minimalist retailer MUJI — have been embracing it in their bid to move away from plastic, as have producers of coffee and cocoa across the world.

 

Environmental, social, and corporate governance concerns have been giving other forms of jute goods a leg-up, too.

 

A CareEdge report in March mentioned that the overall export of jute products has seen traction over 2015-16 through 2021-22, witnessing a compound average growth rate of 12 per cent.

 

But the momentum appears to have hit a speed bump in 2022-23 (FY23), with major economies tapering off buying.

 

Data sourced from the Indian Jute Mills Association (IJMA) shows that the value of jute goods exports has seen a decline after eight-odd years. It is compiled from the data from the Directorate General of Commercial Intelligence and Statistics (DGCI&S).

 

The drop in FY23, however, came on the back of a nearly 37.8 per cent jump in exports in 2021-22 (FY22).

 

Overall, the export of jute goods by value stood at Rs 3,510.63 crore in FY23, a drop of 13.11 per cent from Rs 4,040.43 crore in the previous year. The sharpest decline is in floor covering at 23 per cent and yarn at 37 per cent. Shopping bags, which accounted for about 20 per cent of total exports in FY22, saw a dip of 4 per cent. 

 

It’s not as if all export items have witnessed a drop.

 

Aniket Dani, director-research, CRISIL Market Intelligence & Analytics, said nine jute commodities under bags and sacks maintained a growth of 7 per cent, notwithstanding overall exports being fraught. These nine commodities accounted for 53 per cent of total jute exports in FY23.

 

Six commodities under fabric had shown a high growth of 36 per cent over the last fiscal year. “However, this accounts for only 0.7 per cent of total jute exports,” said Dani.

 

IJMA Chairman Raghavendra Gupta said there is a glut in jute goods.

 

“Global recession in Europe and America has taken a toll on export demand — whether it’s hessian (also termed as burlap), shopping bags or jute yarn.”

 

“We are expecting the trend to continue through the current year,” he added.

 

Hemant Bangur, executive chairman, Gloster, said that exports were down due to reduction in demand on account of destocking.

 

“After the pandemic, things have normalised, leading to contraction in demand,” he said.

 

The bigger problem, said Bangur, was a collapse in prices.

 

“It’s a double whammy for jute mills — we are exporting less in volume and value,” he said.

 

Utkarsh Kanoria, executive director, Cheviot Company, said that its exports to Russia and Ukraine had stopped. “But the larger impact was due to Europe,” he clarified.

 

Cheviot makes interim products for shopping bags.

 

“The segment has been badly hit and our exports are down by about 20 per cent since the war. Floor coverings have also seen a drop of 20-30 per cent as consumers are not spending on discretionary items like rugs and carpets,” said Kanoria.

 

“Last year, Europe was impacted by high energy prices. Now, it’s just a general slowdown and absence of demand,” he added.

 

In the domestic market, private orders have slumped, even though government buying is robust.

 

The Jute Packaging Material Act, 1987, mandates that 100 per cent of foodgrain and 20 per cent of sugar production are packed in jute bags. For this reason, the Rs 10,000-12,000 crore industry is heavily dependent on government indents.

 

“A lot many changes have happened after Covid-19 — people are cutting costs and shifting to lower cost packaging material. As a result, we have lost a significant share of private orders. But the government has increased buying,” said Sanjay Kajaria, an owner of four jute mills.

 

Although there is no dearth of orders for mills because of government buying, the bigger problem is with margins. Margins in value-added items that are exported and even for private orders are higher.

 

Kajaria also said that a section of the machinery was not being used due to lower demand in export markets and shrinking private demand in the domestic market. That has resulted in lower capacity utilisation.

 

G R Verma, president, Birla Jute Mills, said that capacity utilisation for sacking has been better as compared to previous years due to good demand for foodgrain packaging.

 

“Had exports not been down, the overall capacity utilisation would have been higher,” said Verma.

 

Mill owners are divided on whether a revival in export demand will happen anytime soon.

 

 

 

THE GOLDEN FIBRE

 

 

Rs 10,000-12,000 crore Size of jute industry

 

Over 65% Procurement by government agencies for food packaging; exports account for for 15% of production and catered to by modernised mills

 

13.11% Drop in export of jute goods in FY23. Reasons: Market lethargy, particularly Europe

 

37.8% Jump in jute exports in FY22