Bangladesh Energy Crisis Impacts Production Costs for Global Clothing and Footwear Brands

Bangladesh's energy crisis is a long-standing problem that has worsened considerably between 2024 and 2026, mainly due to its reliance on imported fuels and global geopolitical developments.

Bangladesh: Main causes of the energy crisis

• High import dependency: Bangladesh depends on imported energy for 40-65%, especially liquefied natural gas (LNG) and oil. Fluctuations in global energy prices directly impact the country.
• Foreign currency shortage: The foreign currency reserve crisis (Dollar Crisis) has led to government liquidity problems in paying for fuel imports and subsidizing private power plants, causing many plants to halt operations.
• Declining domestic natural gas: Bangladesh's own natural gas reserves have steadily decreased, forcing greater LNG imports to meet electricity demand.

Impact from the "Iran War" and Middle East conflict

Tensions or war involving Iran have severely affected Bangladesh strategically:

• Hormuz Strait trade route: About two-thirds of Bangladesh's LNG imports (mainly from Qatar and Oman) pass through the Strait of Hormuz. If this route is closed or disrupted by war, Bangladesh would immediately face a gas shortage.
• Rising energy prices: The Middle East conflict has pushed global oil and gas prices sharply higher (Energy Shock). Bangladesh, already budget-constrained, cannot compete on the spot market for gas purchases.
• Energy security: With reduced supply, the government has declared periodic load-shedding and tightly controlled energy use.

Impact on the garment and global footwear industries

The ready-made garments (RMG) sector, which accounts for over 80% of the country’s export revenue, has been hardest hit:

• Production disruptions: Many factories face frequent blackouts and low gas pressure, reducing machinery efficiency. Some data indicates production capacity may fall by 30-50% at times.
• Higher costs: To meet deadlines, factories must use diesel generators, which are costlier than gas, along with rising electricity prices due to government subsidy cuts.
• Global brand confidence: Major brands like H&M, Zara, and Adidas, which source from Bangladesh, are concerned about delivery delays (lead time). Prolonged crisis may prompt them to shift production or orders to countries with more stable energy, such as Vietnam or India.

The Bangladesh government is attempting solutions including

1. Price restructuring: Increasing electricity and gas tariffs to reduce public debt burden.
2. Seeking new import sources: Pursuing long-term contracts with countries outside conflict zones and requesting energy assistance from neighbors like India.
3. Promoting renewable energy: Though progress is slow (currently only 2-4% share), campaigns have begun to install solar panels on industrial factory rooftops to save daytime electricity.