Since the onset of the Iran conflict, the surge in fossil fuel prices has placed immense pressure on polyester suppliers and garment manufacturers in India and Bangladesh. This situation could lead to rapidly rising costs for fast-fashion retailers such as Zara and H&M.
Madhu Sudhan Bhageria, Managing Director of Filatex, one of India's largest polyester yarn producers, stated that procurement costs for purified terephthalic acid (PTA) and monoethylene glycol (MEG)—petroleum-derived raw materials used in yarn production—have increased by nearly 30%. This is due to price hikes from Chinese suppliers and supply disruptions from the Middle East.
The crisis is rippling across the Asia-dominated apparel supply chain. Avichal Arya, CEO of Bindal Silk Mills, which supplies dyed and printed polyester fabrics to retailers including H&M, Zara's parent company Inditex, Target, Walmart, and IKEA, reported that the energy crisis has "significantly" driven up the costs of chemicals and dyes.
Compounding the problem, Arya noted that a liquefied gas shortage caused by the conflict has forced many workers to leave Surat, a textile hub in Gujarat, western India. "Currently, we are finding it very difficult to effectively meet the demands of global orders," he said.
Polyester fiber, known as Dacron in China, is made from petroleum derivatives and dominates the textile industry, accounting for 59% of global fiber production. Its applications range from running shorts to dresses. This sector is now directly affected by tightened supplies of refined petroleum products due to the blockade of the Strait of Hormuz.
In Surat, India, half of the 200 industrial looms used by Radheshyam Textile to weave polyester fabric have been idle since the conflict escalated in late February. "Before the conflict, our daily production was 10,000 meters, but it has now dropped to 3,500–4,000 meters per day," said owner Kaushik Dudhat. He has halted purchases of new polyester yarn, stating that sharp price increases would force him to raise his own prices by about 15%—a move his clients, primarily garment traders, are unlikely to accept.
Kailash Hakim, President of the Federation of Surat Textile Traders Association, reported that rising costs have led Surat's textile dyeing and printing mills to suspend operations for two days a week, up from one day previously. "If this continues, raw material shortages will begin, and factories will have to shut down," he warned.
Data from Wood Mackenzie shows the price of polyester staple fiber in India jumped from 100 rupees per kilogram in late February to 126.5 rupees a month later. Although prices moderated slightly after the Indian government significantly reduced import duties on petrochemical feedstocks, they remained at 120 rupees as of April 9.
In Bangladesh, factories that primarily produce cotton garments are facing dual pressures: rising prices for polyester sewing thread used in machines and increased logistics costs due to higher retail fuel prices.
An industry-reviewed letter dated April 5 revealed that Coats Bangladesh, a subsidiary of UK-listed Coats, will raise prices by 15.5% starting April 15, citing "sharp increases in the cost of petroleum-derived raw materials" and higher transportation expenses.
Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association, stated, "Buyers have become more cautious, carefully calculating risks before placing orders, which could impact order volumes."
Bruna Angel, Principal Analyst for Fibers at Wood Mackenzie, commented, "If this continues for another month, it's inevitable—clothing production will decline, and we'll see so-called demand destruction as retailers are forced to raise prices and consumers cut back."
Although retailers have temporarily mitigated short-term impacts through advance purchasing, cost pressures are expected to eventually reach retailers reliant on Asia-centric polyester supply chains.
UK retailer Primark indicated that its spring-summer inventory and most of its autumn-winter stock would be unaffected. However, George Weston, CEO of its parent company Associated British Foods, told Reuters, "If we were procuring energy-related raw materials today, we would face significant inflationary pressure, but we are not currently making such purchases." He added, "Perhaps by the time we need to re-enter the market, prices will have normalized, but that remains uncertain."
An industry source mentioned that H&M anticipates price increases from Bangladeshi suppliers in the coming weeks but plans to absorb these costs internally. Inditex, the parent company of Zara, declined to comment on its polyester supply situation.
Retailers like Zara and H&M have increasingly shifted toward using recycled polyester—made from discarded plastic bottles—which may partially offset cost pressures from rising oil prices. However, recycled polyester accounts for only 12% of total global polyester production.
Petrochemical-derived materials, such as ethylene-vinyl acetate (EVA), widely used in athletic footwear production, have also raised concerns among some US retailers.
Matt Priest, President of the US Footwear Distributors and Retailers Association, stated, "Regardless of where your shoes are sourced, the impact is comprehensive." The association recently listed 25 petrochemical components used in shoe manufacturing—from synthetic rubber outsoles to polyurethane foam and adhesives.
Rising costs are likely to drive up retail prices and make it more challenging for brands to forecast demand. A Nike spokesperson confirmed, "Oil-related materials do impact product costs."
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