The next unlikely victim of Strait of Hormuz Iran fuel crisis? Fast fashion, polyester, synthetic fabric, Temu
David Fickling
You might think missiles flying over the Strait of Hormuz are a world away from your closet full of fleece jackets, tights, and sneakers.
In fact, this couldn’t be further from the truth. Most of your wardrobe is made of fat in the form of polyester, nylon, spandex and other synthetic fibers.
Although the fluctuations caused by the oil shock are reflected more quickly in gasoline, diesel and flight ticket prices, they also silently spread to the ready-made clothing trade. The most valuable garments—a $1 pair of tights from Shein or a $15 jacket from Temu—may take the biggest hit.
The first sign of a supply shock is often panic buying, such as the toilet paper craze during the COVID-19 pandemic and drivers filling their vehicles’ fuel tanks in advance in response to news of US-Israeli attacks on the Middle East.
So far this has been good news for some petrochemical companies supplying the fashion industry. Tongkun Group, which produces about 18 percent of the world’s polyester yarn, expects its net income to triple from the previous year in the six months to June.
This is likely because garment companies, fearing disruption, are increasing the cost of their products even when working with raw materials purchased when oil prices were lower. Polyester futures in China rose 25 percent in March, reaching the highest level in nearly four years.
Those who view sustainability initiatives as meaningless nonsense may now wish they were more proactive about it.
Others are worse off. Shares of Hengli Petrochemical have fallen by almost a third so far this year. The company processes crude oil into polymer resins and fibers, supplying other companies like Tongkun, and halts production as supplies dwindle. China’s synthetic fiber production fell by 11 percent in April compared to the previous month, falling to its lowest level since 2024.
Even Tongkun is slipping on thin ice. Using short-term bank loans and prompt payments from customers to finance working capital, the company relies on a seamless supply chain to avoid cash crunches. The conflict in Iran risks throwing a wrench into this mechanism.
These problems are likely to get worse before they get better. Compared to gasoline and diesel, primary plastics are relatively easy to store in tanks, reels and sacks. This means there is slack in the system to absorb shocks, at least in the short term. China’s cutback in polymer production has been one of the main levers that have enabled the global economy to recover from the loss of nearly 20 percent of its crude oil supply. However, this rest will not last forever, as shipments through the Bosphorus are still at low levels and the state’s oil reserves are decreasing.
Those who view sustainability initiatives as meaningless nonsense may now wish they were more proactive about it. The best defense against oil supply disruption is to stick to a chain of alternative materials, such as recycled fibres.
This means Zara owner Inditex and Hennes & Mauritz may be in a better position to weather the disruptions than Uniqlo owner Fast Retailing. Almost all of the polyesters are sourced from recycled materials, compared to less than half of the highly engineered functional fabrics that Uniqlo specializes in.
Using natural fibers such as cotton is another alternative, but this industry is unlikely to be immune from the conflict in the Bosphorus. India is the second largest fiber producer and depends on the Gulf for supplies of natural gas and urea for fertilizer production.
Although it has not yet reached production, conditions in the market are already tight: Cotton prices reached a two-year high in May and world stocks are heading towards their lowest levels in at least a decade.
Fashion brands don’t just use oil to make their clothes and grow natural fibers. They also burn them to transport materials and finished products around the world. When you order a product from Asos or Temu, you are actually booking a seat on one of the planes connecting the Asian cloth trade production centers to the world.
Zaragoza, a city in northern Spain that sees almost no passenger traffic at its airport, is Spain’s third-largest air transport hub, thanks to logistics centers near Zara. Crocs Chief Executive Andrew Rees told investors in April that shipping costs have a “potentially greater impact” on margins than the cost of plastic resin materials, leaving Crocs likely to be at the cutting edge of its plastic addiction.
It may take some time for the prices displayed on the hangers to be affected. Tight margins will be more likely to emerge by March 2028 than in fiscal 2027, according to Paul Vogel, chief financial officer of VF Corp, which owns the Timberland and North Face labels.
But once they do, it will likely be long-lasting. Shoppers trying to reduce their consumption of single-use plastic need to take a look at their wardrobes.
Your biggest pile of disposable polymers might be clothes you bought online and never wore again.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. He previously worked at Bloomberg News, the Wall Street Journal and the Financial Times.
Bloomberg
