Iran War Hits Asia's Polyester Suppliers to Fast Fashion

Conflict Escalates Costs for Polyester Producers

A surge in fossil fuel prices since the Iran war is squeezing polyester suppliers and garment makers across India and Bangladesh. This threatens to raise costs for fast-fashion retailers like Zara and H&M, which rely heavily on the region's textile industry.

Overview of the Situation

Polyester, which dominates 59% of global fibre production, is made from petroleum-derived feedstocks. Indian polyester producer Filatex reports paying nearly 30% more for these materials due to Middle East supply disruptions and higher prices from Chinese suppliers. This pressure is felt across the clothing supply chain, affecting everything from yarn to dyes and chemicals.

Impact on the Global Market

The rising costs are causing significant operational challenges. Some textile mills in Surat, India, have cut daily production by more than half, from 10,000 meters to around 4,000 meters. While retailers are currently shielded by forward buying, industry sources suggest brands like H&M expect price increases from suppliers and may have to absorb them to avoid impacting consumers immediately.

Summary

If the situation persists, the industry faces raw material shortages and factory shutdowns. Analysts warn that prolonged high costs could lead to retailers raising prices, potentially resulting in what is known as demand destruction as consumers cut back on purchases.

FAQ

Q: Why is the Iran war affecting fashion prices?
A: The conflict has increased fossil fuel prices. Since polyester is made from petroleum derivatives, the cost of its raw materials has surged, impacting the entire apparel supply chain.

Q: Which major brands are potentially affected?
A: The supply chains for major retailers including Zara-owner Inditex, H&M, Target, and Walmart are impacted by the rising costs in their Asian manufacturing hubs.

Source: investing.com