There may be an increase in the prices of branded clothes.
You may think that missiles passing over the Strait of Hormuz are a far cry from your wardrobe full of fleece jackets, leggings and trainers, but that’s not at all the case. Most of the clothes in your wardrobe are made from the same oil, of which the entire world is facing shortage.
Yes, oil is used to make polyester, nylon, spandex and other synthetic fibers from which clothes are made. However, the impact of fluctuations in petroleum prices is first visible on the prices of petrol, diesel and air tickets, but gradually its impact is reaching the clothing business as well. The cheapest clothes — like $1 tights from Shein or a $15 coat from Temu — may have the biggest impact. Let us try to understand its effect in detail…
The industry is being affected
So far, this has been good news for some petrochemical companies that supply the fashion industry. According to Bloomberg report, Tongkun Group Company, which produces about 18 percent of the world’s polyester yarn, expects its net income to triple compared to last year in the six months to June.
The reason for this could be that clothing companies are increasing the prices of their products due to fear of supply disruption, while the company is using the raw materials that were purchased when oil prices were low. Polyester futures in China rose 25 percent in March to their highest level in almost four years.
The condition of other companies is bad. So far this year, shares of Hengli Petrochemical Company have fallen by almost one-third. The company converts crude oil into polymer resins and fibers and supplies it to other companies like Tongkun. Due to less supply he has to stop his production. In April, China’s synthetic fiber production fell 11 percent from the previous month to its lowest level since 2024.
Tongkun’s situation is also critical. Relying on short-term bank loans for its working capital and prompt payments from customers, the company relies on a seamless supply chain to avoid cash shortages. There is a danger of disruption in this system due to the ongoing conflict in Iran.
use of recycled plastic
According to Bloomberg report, the situation may get worse before it gets better. Compared to gasoline and diesel, virgin plastics are much easier to store in warehouses, spools and sacks. This means that there is room for the system to absorb shocks, at least for a short period of time.
The reduction in Chinese polymer production has been one of the main reasons due to which the global economy was able to withstand a reduction of about 20 percent in the supply of crude oil. But shipment through the strait is still at a lower level and the process of extracting oil from the government petroleum reserves is also slowing down.
Those who dismissed ESG initiatives as useless may now be wishing they had done something about it earlier. The best way to cope with oil supply disruptions is to rely on alternative material chains, such as recycled fibres.
This means that Zara’s parent company Inditex SA and Hennes & Mauritz AB, Uniqlo’s parent company Fast Retailing Co. They may be in a better position to face disruptions than Almost all of their polyester comes from recycled materials, while less than half of the specialized functional fabrics that Uniqlo specializes in are made from recycled materials.
cotton production
Using natural fibers like cotton is another option, but even this industry cannot escape the impact of the ongoing conflict in the Strait. India is the second largest producer of this fiber and is dependent on Gulf countries for the supply of natural gas and urea to make fertilizer.
Although this has not yet affected production, the situation in the market is already difficult. Cotton prices reached their highest level in two years in May and stocks around the world are falling to their lowest level in at least a decade.
Widespread impact will be seen in 2028
It may take some time for the prices shown on the hanger to be affected. VF Corp., the owner of the Timberland and North Face labels. According to CFO Paul Vogel, the decline in profits is more likely to be visible in the year to March 2028 rather than in the 2027 financial year. However, when this happens, its impact is likely to last for a long time. Shoppers who are trying to reduce their use of disposable plastic should take a look at their wardrobe. The biggest pile of single-use plastic is probably the clothes you bought online and never wore.
