Bangladesh is facing a serious crisis in securing liquefied natural gas (LNG), related to disruptions in shipments through the Strait of Hormuz. This crisis has impacted the country's key industries, particularly textile and ceramic factories, and has so far imposed about $2 billion in additional costs on the country.
Impact of the Crisis on Textile and Ceramic Production
Textile and ceramic factories in Bangladesh are currently operating significantly below their normal capacity due to gas shortages and rising prices. Some industrial units had to halt production in August and September due to intensified gas shortages and the shutdown of one of the LNG import terminals.
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The textile industry in Bangladesh, which is considered an energy-intensive industry, relies on gas-fired boilers to provide steam needed in the dyeing and finishing processes. Currently, the gas shortage and the rising cost of securing it have posed serious challenges to the operations of this industry.
Dependence on Gas Imports and Rising Costs
Last year, Bangladesh sourced about 60% of its LNG imports from Qatar. Long-term contracts with this country had helped Bangladesh avoid the severe price increases in the spot market following the outbreak of the Russia-Ukraine war in 2022. However, under the current circumstances and following Qatar's inability to deliver gas shipments, this dependence has become one of the serious vulnerabilities of Bangladesh's economy.
The cost of purchasing each LNG shipment for Bangladesh has now exceeded $100 million, which is about four times the cost of a shipment under a long-term contract. The increase in gas import costs has so far imposed about $2 billion in additional costs on the country.
The continuation of the crisis and rising gas prices in global markets could expose more industries in developing countries to similar problems, and the consequences of energy supply disruptions from the Strait of Hormuz could extend beyond energy markets, putting pressure on the manufacturing and industrial sectors of emerging economies.
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