Energy Shock From Iran War May Make Shopping From Zara, H&M More Expensive Sneakers To Get Costly Too

(MENAFN- Live Mint) Apparel sold by fast-fashion retailers such as Zara and H&M may soon become more expensive 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 disrupted the supply of refined petroleum products. Polyester, made from oil derivatives, dominates the textile industry, accounting 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 for petroleum derivatives used in the production of polyester. The disruption has hit the clothing supply chain, dominated by Asia.

Additionally, the fuel crisis has sharply increased 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.

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

Fast Fashion, Sneakers May Cost More

Cost pressure is likely to move downstream from suppliers to fast fashion brands that rely on polyester-heavy supply chains from Asia. Though certain retailers may be able to absorb initial shocks due to buying stock in advance.

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 global polyester production.

Also Read | Filatex bets on polyester recycling and renewables for next phase of growth

Meanwhile, British retailer Primark said its spring/summer stock and a large part of its 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 a 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.”

Polyester Supply Chain Shock

In Surat, half of the 200 industrial looms that weave polyester at a mill have sat silent, with the production falling by 50-60% since the conflict started in late February. The surge in prices of polyester yarn – by around 15% – is expected to trickle down from mill owners to their customers, mainly the cloth traders.

Data from Wood Mackenzie shows the price of polyester staple fibre in India jumped from 100 rupees per kilogramme at the end of 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 9 April.

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

Also Read | India's textile waste holds billions, but inefficiencies block recovery

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