Bangladesh's textile industry hit by higher input costs as war-related price pressures mount

Bangladesh’s textile industry is facing mounting pressure as production costs rise amid the impact of the US–Iran war, according to Nikkei Asia. The sector is central to the economy, with annual exports of more than $40 billion and accounting for about 16% of GDP.

Cost surge linked to oil prices and supply-chain disruptions

Industry leaders said that since the war began, prices of synthetic fibers and major chemicals have increased by 10% to 15%. In some cases, the price of at least one input has tripled. The increases are attributed mainly to higher global oil prices and disruptions to supply chains for oil-derived products such as polyester and nylon.

Navidul Huq, CEO of Mohammadi Group, said all fibers and raw materials are rising in price, not only polyester and nylon. Asif Zahir, CEO of Ananta Group, similarly confirmed that prices of synthetic fibers, yarns and fabrics are increasing.

Shams Mahmud, CEO of Shasha Denim, said input costs originating from oil rose about 10% to 15%, while some chemical prices rose much more. He cited sulfuric acid—used in fabric processing—rising from about 50 taka (0.40 USD) per liter before the war to around 150 taka today.

Producers absorb costs; logistics and energy risks grow

Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said cost pressures are spreading beyond textile inputs, lifting the prices of other energy-intensive items such as carton paper used for boxes.

He added that producers cannot pass these added costs to customers for current orders, forcing them to incur losses in the short term. Khan also warned that if gas and electricity supplies are not continuously ensured, companies may miss production deadlines. In that scenario, they might need to switch to air freight, which would be far more expensive.

While industry leaders said there have been no major shipment disruptions so far, they warned that logistics costs could rise in the coming weeks as higher oil prices begin to affect freight rates. They noted that the full impact has not yet been felt because shipment volumes have only started to increase after the Muslim Eid holidays.

Shehab Udduza Chowdhury, vice president of BGMEA, said transport costs are rising as diesel shortages push fuel prices higher, increasing costs for both imports and exports. “With transport costs rising, buyers are trying to shift that burden to us,” he said. “They say it’s not their fault, but it’s not ours either. Yet we are still being asked to bear these additional costs,” Chowdhury said.

Diesel access remains limited; government fuel reserve cited

Energy security is emerging as a major risk. Chowdhury said Bangladeshi authorities have issued a provisional measure allowing plants access to limited diesel supplies—mainly to run backup generators. Under the arrangement, some facilities receive about 500 liters of diesel upon presenting certification, but supplies remain tight.

The government said Bangladesh has about a one-month fuel reserve. Working hours for government agencies have been shortened, and markets and shopping centers close before 6 p.m.

For now, textile production is described as stable because raw materials had been purchased beforehand. However, Khan said pressure could increase in the weeks ahead if importing new raw materials is disrupted.

Demand outlook mixed: orders steady, but weakness and inflation bite

On the demand side, exporters reported no cancellations of orders in key markets such as the United States and Europe yet, but concerns are rising as new orders from these markets have weakened in recent months.

Meanwhile, markets in the Middle East—previously viewed as growth engines—have shown signs of being affected. Khan said: “The Middle East is a region we are trying to develop as part of our market diversification strategy, but this market has been significantly affected. If the conflict lasts longer, customers may become more cautious.”

Chowdhury said total demand for Bangladeshi textiles has fallen about 25% in the past month compared with a year earlier, reflecting inflation pressures in export markets and trade disruptions. He added that when inflation rises, demand for garments decreases as consumers prioritize essentials such as food and healthcare.

Broader context: exporters already faced a difficult 2025

Industry leaders said the current situation follows a challenging 2025 for Bangladesh’s textile exporters, particularly small and medium-sized firms. They pointed to tariffs imposed by President Trump that created obstacles in the U.S. market, alongside increased competition in other large markets such as Europe, even as exporters sought growth supported by favorable monetary policies and stronger logistics networks.

“The hardest part of the current situation is the uncertainty,” Mahmud said.