The Strait of Hormuz disruption has served as a stark reminder of how dependent global fiber markets remain on energy, raw materials and geopolitical stability. While polyester and nylon prices spiked sharply during the early stages of the crisis, increased exports from the U.S., emergency reserve releases and China’s ability to maintain production helped prevent widespread shortages and gradually eased pricing pressures. Input flows and pricing have been further complicated by yet another impending tariff deadline. With Section 122 tariffs slated to end in July, the fashion supply chain has been left to wait, wonder and watch for what comes next.
For apparel manufacturers and sourcing executives, one of the biggest takeaways from the last few months may be what didn’t happen. Despite disruptions across Asia and rising logistics costs, U.S. fiber producers saw little meaningful increase in demand, underscoring the persistent cost advantage held by overseas suppliers. At the same time, the crisis accelerated conversations around supply chain resilience, inventory strategies and AI-powered logistics tools as brands and manufacturers look for new ways to navigate an increasingly uncertain environment.
Here, the Wood Mackenzie team, including Bruna Angel, principal analyst, fibers; Maria de Castro Lima, senior research analyst – Americas, paraxylene & derivatives markets; and Claire Lominick, research associate, commodity trading data & analytics, break down how production flows changed during the Iran war, why some fiber prices will remain high even after the Strait has reopened and the valuable lessons the apparel industry has learned from this latest shock.
HGI: Can you provide context for prices, capacity and demand before and after the U.S. and Iran signed the memorandum of understanding (MOU) on June 17? Maria, let’s start with the U.S. perspective.
MCL: It doesn’t feel like things have changed very much so far from when this memorandum of understanding happened. There’s still a lot of uncertainty when it comes to orders from abroad because of the tariffs. What we’re hearing is [importers are] waiting for prices to come down because they still believe it will happen, but they’re still struggling with that uncertainty in bringing in material when it might not come in by July 25 when the [Section 122] tariffs phase out. So they’re at a very wait-and-see, hand-to-mouth position right now. It’s not like things have changed all of a sudden.
We didn’t have any shutdowns in the U.S. that had to do with demand or feedstock availability. The U.S. didn’t have that impact like Asia had, just because of the raw materials being pretty abundant in the U.S. and demand hasn’t really changed all that much domestically for U.S. fiber. Maybe it increased just slightly at first, but it was not very meaningful at all. It’s kept quite stable, which was pretty depressed.
[Right now] shipping is expensive. There are peak season surcharges, and there is a belief that shipping companies are trying to increase rates as much as they can. They’re trying to frame it as [a response to potential] higher demand because of the MOU.
HGI: What can we infer about the U.S. fiber market if what you’re saying is that there’s been no real increase in demand despite the challenges fibers coming out of Asia have faced?
MCL: We can infer that the price discrepancy is so high between Asia and the U.S. that downstream mills aren’t willing to switch their sourcing to U.S. local producers. There have been cases where people have done that for certain raw materials, but it hasn’t been significant at all. We didn’t really hear anything ticking up in apparel markets. Maybe they could have increased manufacturing in Central America, which would naturally help the producers in the U.S. that send their fiber there, but that didn’t really happen.
The competitiveness in the U.S. is very limited and more geared towards the same customers that have been buying from the U.S. [due to] proximity. Or they’re buying because they have better payment terms, or they have a good relationship with those producers, or they have specialty needs like for the military under the Berry Amendment.
HGI: Bruna, what’s been the impact on fiber producers in Western Europe?
BA: For the bigger producers, the first month [of the war] was a shock. Europe doesn’t have sufficient domestic energy production or Purified Terephthalic Acid domestic production, with the vast majority of energy coming from the Middle East and a large percentage of PTA coming through South Korea, and obviously South Korea depends on the upstream from the Middle East.
That first month, what we saw was a lot of contracts being reneged on and domestic prices spiked, even contract prices. Like Maria was saying, the downstream industry did not want to buy domestic because the prices are so high. They decided to wait and see what happens to imports from Asia. Some of the Indian producers had to stop their contracts. They didn’t load containers because a few producers in India stopped production in March, and India was very hard hit because they didn’t have that much raw material produced domestically, and obviously they rely on imports of oil and gas. China had a huge load of oil, and they also have their coal petrochemicals, and they started rationing, not massively, but there was so much capacity available that exports out of China didn’t see a reduction.
Once March was over, we started to see the emergency reserves sales. We started to see exports out of Yanbu [Saudi Arabia’s port]. Because the sanctions were lifted, we saw the Iran and Russia oil sales in March and April. In April, there the market eased, and that’s when prices started to come down.
We saw a major reaction, both in Europe and in Asia in March, and obviously, because there were stoppages in Asia and in Europe, the raw material prices went through the roof, but then the U.S. started to export a lot more energy, and although supply was delayed for many Asian, European and African Middle East destinations, it arrived and things kept going.
Then, what we’ve seen is buyers had normal amounts of stock, and in March they decided to buy the minimum possible and blend with lower cost stock so they didn’t have to pass the whole increase down the supply chain. Imports of fiber into Europe increased through April and May, but there was also a little bit more domestic demand, not massive. This was because the raw material was there, and because the downstream wanted to make sure that they had at least some domestic supply backup that they could get to in a week or two rather than the six to 12 weeks it would take from Asia, depending on where you are in the European area.
Also, shipping got dislocated, so Turkish producers were able to sell what they could produce into Europe and into Egypt as well. Because of the sanctions and the U.S. blockade, a lot of stuff stopped coming from Asia to Iran, and Iran’s downstream textile producers started importing overland mainly from Turkey, so Turkey did very well.
HGI: Let’s talk about the impact on prices.
BA: In Asia again, we had the big spike, but then slowly, as we eased into the second and third months of the closure of the Strait of Hormuz, there were all these workarounds. Not that they would last forever, because the emergency reserve is low, with record low oil reserves in the U.S. And then we had China with their coal-based petrochemicals, obviously not replacing everything that they weren’t importing, but they had big reserves. Prices started to ease a little bit.
India was harder hit. Countries like Bangladesh, Vietnam and Pakistan were really hard hit in terms of energy costs and availability to produce fiber, but China kept producing, and if China keeps producing, then the world has more than enough fiber.
China restarted a lot of the fiber and PTA producers that were closed in late April and into May. There’s plenty of fiber, and at lower prices than in March. What was holding things back is that the downstream was not receiving all the orders they expected, and we’re now coming into the slow season for fiber demand, because all the summer textiles are now at retail, and you’re waiting until probably September or late August for December [orders]. So, orders were slow. People were using as much of their inventory as they could down the supply chain.
In mid to late May, we were all thinking prices are going to have to go back up, because inventories have been run down and you can no longer blend all the cheap inventory with the higher-priced fibers. Then the talk of a ceasefire started, so prices started going down—mainly for polyester, but nylon as well. Acrylic started to creep down, but not as much relative to polyester and nylon.
Cellulosics did not go down because they were not pushed up by oil. Cellulosic prices were pushed up, by demand and by [a shortage of] caustic soda and sulfuric acid, a lot of which was imported from the Middle East. When the huge Ras Laffan [LNG industrial complex] got hit, there was no sulfur coming out of the Middle East, and it will not be coming out for quite a few months. I don’t see cellulosic fiber prices coming down anytime soon, because of the big cost increases of the sulfuric acid and the other additives in the process.
HGI: How has this affected apparel order flow downstream?
BA: Orders were starting to creep back up in certain regions for China. This is despite all the forced labor investigations that the U.S. is doing. But it is because Bangladesh was not able to fulfill orders in time due to their electricity issues. Pakistan had certain power issues as well plus they did not have the raw materials for a while, and India had a lot of issues with heat as well as raw materials [shortages] because they import a lot of Monoethylene Glycol (MEG) from the Middle East. So quite a few orders just went back to China, because China can very quickly turn them around, and because they have a history of producing for the brands, many of the producers have all the orders and all the setup for the different brands and retailers.
HGI: What, if anything, do you think that the market has learned from the last year in general and the challenges presented by the war in Iran specifically? Is it going to come out smarter or stronger in any way?
BA: Managing your logistics, inventory and supply chain with AI is something that will have been learned. I was very surprised by the ability of supply chains to adjust to the Strait of Hormuz [closure]. I thought you would have people with pen and paper rerouting ships. Ports were a little congested, but it wasn’t the congestion we saw post Covid, and all of that is because of AI. It’s giving them the ability to do calculations faster and look ahead more steps. That’s one positive.
One negative is the European downstream will be holding more stock, and that is an added cost. But they don’t want to be left in a lurch.
CL: Something I’ve heard from players is in the market is they’ve learned from Covid. At that time there was a lot of panic buying because we were not used to having this much uncertainty. Now, six years out from that, we’re kind of used to uncertainty as the norm, and there’s not as many panicked reactions to things. [For instance,] they take the memorandum of understanding with a huge grain of salt. Everyone is expecting uncertainty.
