Bangladesh Garment Makers Face Energy Crisis, Forcing Production Halts

An acute energy crisis is disrupting Bangladesh's garment manufacturing sector, the world's second-largest, leading to widespread production stoppages and cancelled orders from international buyers. The country's heavy reliance on natural gas, furnace oil, and diesel for electricity has left its key export industry vulnerable to global energy shocks.

Widespread Industry Disruption

The impact on the sector, which accounts for over 80% of Bangladesh's export earnings, has been severe. A recent survey of 134 knitwear factories cited by Reuters found the majority are struggling with the consequences of gas and power shortages.

Key findings from the survey include:

• 55% of factories reported buyers cancelling or reducing orders since late August.
• 78% had partially halted production.
• Factories also reported shipment delays and were forced to offer discounts to buyers.

Compounding the pressure, the government raised fuel prices by as much as 17.4% on Monday, a move it attributed to soaring global prices and shipping costs. Shahidullah Azim, a garment exporter, told Reuters that margins are being squeezed, making it "increasingly difficult for us to absorb higher production and transportation costs while remaining competitive."

A Case Study in Resilience

Ad

In contrast, some manufacturers with diversified energy sources are navigating the crisis more effectively. 4A Yarn Dyeing, a supplier to major brands including Walmart, Gap, and Next, has maintained uninterrupted production by generating its own power since 2019.

The company meets approximately 40% of its electricity needs through solar panels on its factory roofs, with the remainder coming from its own gas and diesel generators. "We never stayed at a single-source energy dependency. We had backups for everything," company co-owner Abdullah Hil Nakib told Reuters.

Rising Costs and Competitive Threats

Even self-sufficient firms are not immune to rising expenses. 4A Yarn Dyeing has seen its production costs increase by 2% to 3%, adding up to 5 million taka ($40,950) to its monthly fuel bill due to costlier diesel, Nakib said.

The sustained energy challenges risk eroding Bangladesh's competitive advantage. Industry leaders worry that international buyers may shift orders to rival manufacturing hubs like Vietnam and India, which are not facing energy shortages of the same magnitude. "Whether we hold our position against other sourcing countries or lose ground to them depends on how well we manage it," said Mohiuddin Rubel, additional managing director of Denim Expert Ltd.