Iran war hits Asia’s polyester suppliers to fast fashion

A surge in fossil fuel prices since the Iran war is squeezing polyester suppliers and garment makers across India and Bangladesh, threatening to raise costs for fast-fashion retailers like Zara and H&M.

Filatex, one of India’s biggest polyester yarn producers, is paying nearly 30 percent more for the petroleum-derived feedstocks – purified terephthalic acid (PTA) and monoethylene glycol (MEG) – that it needs to make yarn, as Chinese suppliers raise prices and Middle East supply is disrupted, managing director Madhu Sudhan Bhageria told Reuters.

The pain is being felt across the clothing supply chain, which is dominated by Asia.

Avichal Arya, CEO of Bindal Silk Mills, which supplies dyed and printed polyester fabrics to retailers including H&M, Zara-owner Inditex, Target, Walmart and IKEA, said the energy crisis had “drastically” pushed up the cost of chemicals and dyes.

Adding to his woes, Arya said a shortage of cooking gas due to the war has driven many migrant workers to leave Surat, a textile hub in India’s western state of Gujarat. “We are not able to actually meet the demands of the global orders very fruitfully these days,” he said.

Made from oil derivatives, polyester dominates the textile industry, accounting for 59 percent of global fibre production and used in everything from running shorts to dresses. It is directly exposed to 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, though retailers are shielded from immediate pain by forward buying.

British retailer Primark said its spring/summer stock and a big part of autumn/winter stock would not be affected. “If we were buying energy-related raw materials today we would be seeing significant inflation, it’s just that we’re not,” George Weston, CEO of parent company Associated British Foods, told Reuters.

“It may be that when we do have to go back into the market the prices have reduced, but we don’t know.”

An industry source said H&M expects price increases from Bangladeshi suppliers in the coming weeks but plans to absorb them.

• Worldwide oil inventories could sink to record lows
• IEA chief predicts two years for Middle East energy recovery
• China may yet reconsider its ties with Iran

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, made from plastic bottle waste, which could cushion some of the oil-driven cost pressure for them. But globally, recycled polyester still accounts for just 12 percent of polyester production.