US-Iran Tensions Fuel Concerns over Tiruppur's Knitwear Industry

Tiruppur's Textile Hub Faces Growing Pressure as Geopolitics Drive Up Costs

Tiruppur, India's largest garment export hub, is grappling with a perfect storm of rising costs and supply disruptions, threatening the city's competitiveness in the global market. The situation is a result of geopolitical tensions linked to the Iran-US conflict, which has pushed up crude-linked raw material prices globally.

Factories across Tiruppur are struggling to absorb rising costs, from yarn and dyes to freight and labor, even as buyers resist price hikes. Smaller manufacturers are finding it difficult to secure yarn supply, while labor shortages are disrupting delivery timelines. The strain on margins, production schedules, and competitiveness is becoming increasingly evident.

Tiruppur's textile ecosystem has undergone a significant shift in recent years, with a growing focus on polyester and synthetic activewear. The Tiruppur Exporters Association has set a target to increase exports from $5 billion to $10 billion by 2030, with at least 30% of that coming from man-made fibers (MMF). Currently, MMF accounts for less than 10% of exports.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

However, this transition has exposed Tiruppur to crude-linked volatility, with synthetic yarn prices rising 40-50% in recent months. Cotton yarn prices have also increased due to tighter domestic supply and substitution demand.

Garment export orders are often booked months in advance, but by the time production begins, raw material prices may have changed significantly. This makes planning extremely difficult for manufacturers.

At knitted garments manufacturer Kartar Fashions, input costs have risen between 10 and 20% over the last few months, with margins now in the low single digits. Exporters are being forced to absorb a major portion of the increased costs, while larger companies may still be able to manage for some time.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Labour shortages are also disrupting Tiruppur's tightly linked ecosystem, with many migrant workers returning to their home states during the elections and festive season. The shortage is having an outsized impact due to the city's cluster-based manufacturing ecosystem, where delays in one segment quickly ripple across the rest of the supply chain.

Smaller manufacturers are feeling the squeeze harder, with larger exporters with stronger balance sheets able to absorb part of the cost escalation temporarily. Industry estimates suggest that India requires around 330 lakh bales of cotton annually, while projected domestic output this year may remain closer to 280-290 lakh bales.

The Tiruppur industry is calling for the removal of the 11% cotton import duty, which exporters argue could provide some relief. However, the broader challenge goes beyond cotton or even the current geopolitical situation, with Tiruppur's exporters competing with factories in Vietnam, Sri Lanka, Pakistan, and Bangladesh.

The city's exporters are closely watching the policy direction of Tamil Nadu's new government, with Chief Minister C. Joseph Vijay writing to Prime Minister Narendra Modi seeking the removal of the cotton import duty. Historically, governments in Tamil Nadu have remained supportive of industry growth, and the state has recorded double-digit economic growth over the last few years.

For Tiruppur's exporters, the concern is no longer limited to one season of higher prices. The bigger challenge now is whether India's largest knitwear hub can remain globally competitive through another prolonged period of volatility.