Rising Costs in the Textile Industry
The textile industry in India and Bangladesh is facing significant challenges due to a surge in fossil fuel prices, which has led to increased costs for polyester suppliers and garment makers. This situation threatens to raise costs for fast-fashion retailers such as Zara and H&M.
Impact on Polyester Suppliers
Filatex, one of India’s largest polyester yarn producers, is experiencing a 30% increase in the cost of petroleum-derived feedstocks like purified terephthalic acid (PTA) and monoethylene glycol (MEG). This increase is attributed to higher prices from Chinese suppliers and disruptions in Middle East supply chains. Managing director Madhu Sudhan Bhageria highlighted this issue.
The pressure is being felt throughout the clothing supply chain, which is dominated by Asia. Avichal Arya, CEO of Bindal Silk Mills, noted that the energy crisis has drastically increased the cost of chemicals and dyes. Additionally, a shortage of cooking gas due to the war has caused many migrant workers to leave Surat, a major textile hub in Gujarat. “We are not able to actually meet the demands of the global orders very fruitfully these days,” he said.
Polyester, made from oil derivatives, accounts for 59% of global fiber production and is used in everything from running shorts to dresses. It is directly affected by the squeeze on refined petroleum products caused by the closure of the Strait of Hormuz.
Fast Fashion Costs Could Rise
The pressure could eventually move downstream to retailers that rely on Asia’s polyester-heavy supply chains, although retailers are currently shielded from immediate pain by forward buying. British retailer Primark mentioned that its spring/summer stock and a large part of autumn/winter stock would not be affected. George Weston, CEO of parent company Associated British Foods, stated, “If we were buying energy-related raw materials today we would be seeing significant inflation, it’s just that we’re not.”
An industry source indicated that H&M expects price increases from Bangladeshi suppliers in the coming weeks but plans to absorb them. In a statement, H&M said it 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.
Zara-owner Inditex declined to comment on its polyester supply. Target, Walmart, and IKEA did not immediately respond to a request for comment. Retailers like Zara and H&M have shifted to using mostly recycled polyester, which could cushion some of the oil-driven cost pressure for them. However, globally, recycled polyester still accounts for just 12% of polyester production.
Polyester Shock in Surat
In Surat, half of the 200 industrial looms at Radheshyam Textile that weave polyester have been silent since the conflict started in late February. “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,” owner Kaushik Dudhat told. He has stopped buying new polyester yarn, saying the steep price increases would force him to raise his own prices by around 15%, a hike his customers, mainly clothing traders, would not accept.
Rising costs have caused textile dyeing and printing factories in Surat to shut for two days a week, up from one previously, said Kailash Hakim, president of the Federation of Surat Textile Traders Association. “If the situation persists, raw material shortages will start taking place and factories will need to shut down,” he warned.
Data from Wood Mackenzie shows the price of polyester staple fibre in India jumped from 100 rupees per kilogramme at end-February to 126.5 rupees a month later. It eased slightly after the Indian government slashed import tariffs on petrochemical raw materials, but remained at 120 rupees as of April 9.
Prices in China, the world’s biggest polyester producer, have also jumped.
Demand Destruction
In Bangladesh, even though factories mostly make cotton-based clothing, they face higher prices for the polyester sewing thread that feeds their sewing machines, and higher logistics costs from raised retail fuel prices. In an April 5 letter reviewed by, thread producer Coats Bangladesh — a unit of UK-listed Coats — announced a 15.5% price increase effective April 15, citing the “rapid escalation in oil-derived feedstock costs” and higher transportation expenses.
“Buyers are becoming more cautious and carefully calculating risks before placing orders, which could affect order volumes,” said Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association.
“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,” said Bruna Angel, principal analyst for fibres at Wood Mackenzie.
Sneakers Next
Petrochemical-derived materials such as ethylene-vinyl acetate (EVA) are also widely used in sneakers, and U.S. retailers have raised the alarm. “There’s broad-based impact across the board no matter where you source your shoes from,” said Matt Priest, president of Footwear Distributors and Retailers of America, which identified 25 petrochemical-based components used in shoes — from synthetic rubber outsoles to polyurethane foam and adhesives — in a recent report.
Higher costs could push retail prices up and make it harder for brands to forecast demand. “Materials related to oil do have an impact on product costs,” a Nike spokesperson said.
