The ongoing conflict in Iran is creating significant financial strain for textile manufacturers across Asia, with rising oil costs threatening to increase prices for major fashion retailers including Zara and H&M.
Madhu Sudhan Bhageria, managing director of Filatex, a major Indian polyester yarn manufacturer, reports his company now faces costs nearly 30% higher for essential oil-based materials like purified terephthalic acid and monoethylene glycol. These increases stem from Chinese suppliers raising their rates and supply chain disruptions throughout the Middle East.
The textile industry’s supply chain, centered primarily in Asia, is experiencing widespread impact from the energy crisis. Avichal Arya, who leads Bindal Silk Mills and provides dyed polyester fabrics to retailers such as H&M, Inditex (Zara’s parent company), Target, Walmart and IKEA, describes how energy costs have “drastically” increased expenses for essential chemicals and dyes.
Arya faces additional challenges as cooking gas shortages related to the war have prompted many migrant workers to abandon Surat, a key textile center in Gujarat, India’s western region. “We are not able to actually meet the demands of the global orders very fruitfully these days,” he explained.
Polyester, manufactured from petroleum byproducts, represents the dominant material in global textile manufacturing, comprising 59% of worldwide fiber production and appearing in garments ranging from athletic wear to formal dresses. The material faces direct exposure to petroleum product shortages caused by the Strait of Hormuz closure.
While retailers may eventually face increased costs from Asia’s polyester-dependent supply networks, advance purchasing agreements currently provide some protection from immediate price impacts.
Primark, the British retail chain, indicates its spring and summer inventory, plus a substantial portion of fall and winter stock, remains unaffected by current price fluctuations. George Weston, CEO of parent company Associated British Foods, told reporters: “If we were buying energy-related raw materials today we would be seeing significant inflation, it’s just that we’re not.”
“It may be that when we do have to go back into the market the prices have reduced, but we don’t know,” Weston added.
Industry sources indicate H&M anticipates price increases from Bangladeshi suppliers in upcoming weeks but intends to absorb these additional costs internally.
H&M released a statement saying the company “does not see major disruptions to production in Bangladesh and has not observed any noticeable number of requests from suppliers to adjust orders in connection with energy costs.”
Inditex, Zara’s parent company, declined to provide comments regarding polyester supply arrangements. Target, Walmart, and IKEA did not respond to requests for comment.
Some major retailers including Zara and H&M have transitioned toward recycled polyester made from plastic bottle waste, which may provide some protection against oil-related cost increases. However, recycled polyester represents only 12% of global polyester manufacturing.
In Surat, textile manufacturer Radheshyam Textile has idled half of its 200 industrial looms since the conflict began in late February.
Owner Kaushik Dudhat reports daily production has dropped dramatically: “Our daily production was 10,000 metres per day before the war started, but it has fallen to 3,500 to 4,000 metres per day.” He has ceased purchasing new polyester yarn, explaining that dramatic price increases would require him to raise his rates by approximately 15% — an increase his customers, primarily clothing traders, would reject.
Kailash Hakim, president of the Federation of Surat Textile Traders Association, notes that escalating costs have forced textile dyeing and printing facilities in Surat to close two days weekly, up from one day previously. “If the situation persists, raw material shortages will start taking place and factories will need to shut down,” he cautioned.
Wood Mackenzie data reveals polyester staple fiber prices in India rose from 100 rupees per kilogram at February’s end to 126.5 rupees one month later. Prices decreased slightly after the Indian government reduced import duties on petrochemical raw materials but remained elevated at 120 rupees as of April 9.
China, the world’s largest polyester manufacturer, has experienced similar price increases.
In Bangladesh, despite factories primarily producing cotton-based clothing, manufacturers face higher costs for polyester sewing thread and increased logistics expenses from elevated fuel prices.
Coats Bangladesh, a subsidiary of UK-listed Coats, announced a 15.5% price increase effective April 15 in an April 5 letter, citing “rapid escalation in oil-derived feedstock costs” and higher transportation expenses.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, observes changing buyer behavior: “Buyers are becoming more cautious and carefully calculating risks before placing orders, which could affect order volumes.”
Bruna Angel, principal analyst for fibers at Wood Mackenzie, warns of broader consequences: “If this goes on for one more month, forget it — we will have lower clothing production and what we call demand destruction, because retailers will have to raise their prices and consumers will cut their purchases.”
The footwear industry also faces challenges as petrochemical-derived materials like ethylene-vinyl acetate are essential components in sneaker manufacturing, prompting concerns from U.S. retailers.
Matt Priest, president of Footwear Distributors and Retailers of America, explains the widespread impact: “There’s broad-based impact across the board no matter where you source your shoes from.” His organization identified 25 petrochemical-based shoe components — from synthetic rubber soles to polyurethane foam and adhesives — in a recent analysis.
Increased costs may drive retail prices higher and complicate demand forecasting for brands.
A Nike spokesperson acknowledged the connection, stating: “Materials related to oil do have an impact on product costs.”
