Energy shock from Iran war may make shopping from Zara, H&M more expensive, sneakers to get costly too

Apparel sold by fast fashion retailers such as Zara, H&M, etc. may soon get costly as the war in West Asia is squeezing polyester suppliers and garment makers across India and Bangladesh, Reuters reported.

The closure of the Strait of Hormuz has led to supply disruption of refined petroleum products. Polyester, which is made from oil derivatives, dominates the textile industry as it accounts for 59% of global fibre production. It is used in everything from dresses to athleisure wear.

With the West Asia supply disrupted, Chinese suppliers have raised prices. As a result, Indian polyester yarn producers are paying nearly 30% more on petroleum derivatives used in the production of polyester. The disruption has hit the clothing supply chain, dominated by Asia.

Besides, the fuel crisis has drastically raised the cost of chemicals and dyes. "We are not able to actually meet the demands of the global orders very fruitfully these days," Avichal Arya, CEO of Bindal Silk Mills, told Reuters. His company supplies printed polyester fabrics to popular retailers including H&M, Zara, Target, Walmart and IKEA.

Compounding the problem, many migrant workers employed at mills in Surat–India’s textile hub–have left for their native towns due to a shortage of LPG cylinders due to the Iran war.

In a statement, H&M told Reuters that it does not see major disruptions in Bangladesh and that it hasn’t observed "any noticeable number of requests from suppliers to adjust orders in connection with energy costs."

A few brands such as Zara also shifted to using recycled-polyester–made from plastic bottle waste–which could help cushion oil-driven cost pressure. But recycled polyester accounts for only 12% of polyester production globally.

Meanwhile, British retailer Primark said its spring/summer stock and a big part of autumn/winter stock would not be affected as it wasn’t buying energy-related raw materials which are vulnerable to significant inflation.

Apart from apparel, petrochemical-derivatives are also widely used in sneakers, and US retailers have raised the alarm. Footwear Distributors and Retailers of America identified 25 oil-based components used in shoes — from synthetic rubber outsoles to polyurethane foam and adhesives. Its president Matt Priest told Reuters, “There's broad-based impact across the board no matter where you source your shoes from.”

However, a Nike spokesperson dismissed this saying, “Materials related to oil do have an impact on product costs.”

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.

Textile dyeing and printing factories in Surat have also begun shutting for two days a week, due to rising costs.