Bangladesh's garment industry, a linchpin of the global apparel supply chain, is navigating a turbulent period marked by severe energy shortages and a high-stakes payment dispute with a major European buyer. Production capacity has been cut by a third or more, while a conflict over $40 million in alleged debts threatens to disrupt sourcing relationships worth hundreds of millions annually. These converging pressures are testing the resilience of factories that supply many of the world's leading fashion brands. Main Developments The Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the country's apex trade body, has acknowledged that the gas supply crisis has reduced the industry's production capacity by 30 to 40 percent. However, it firmly rejected media reports that several factories, including those of DBL Group, had permanently shut down due to energy shortages, labeling such claims as “completely false and baseless.” In a press release earlier this week, the BGMEA stated that its member factories have managed to keep production running at roughly 60 to 70 percent of capacity, aided by government support. Factory owners are making “every possible effort” to maintain output and ensure uninterrupted export operations, the organization said, attributing reports of closures at DBL Group—which employs 25,000 people—to holiday coordination, shift scheduling, and temporary production adjustments rather than insolvency or liquidation. Read also: 4 Steps Importers Should Take Before New Section 301 Tariffs Despite the BGMEA's assurances, the Dhaka Tribune reported that production in the Savar-Ashulia industrial belt—a key manufacturing hub—has plummeted by 50 to 60 percent because of low gas pressure and frequent power outages. Ahmed Mortuza, director of Projon Sweater in Ashulia, told the outlet that while most manufacturing stages were completed, insufficient gas pressure had halted boiler operations, preventing finishing and ironing. Consequently, his company could not pack and transport finished garments to ports on schedule. Abu Saleh Muhammad Khademuddin, manager of Titas Gas's Ashulia Zonal Marketing Office, said authorities were working to identify the cause of the supply disruption and restore service, but he could not provide a timeline for when conditions would return to normal. The energy crisis is compounded by a separate, acrimonious dispute between local suppliers and LPP, a Polish retailer, over unpaid dues. Background Bangladesh is one of the world's largest garment exporters, with the industry accounting for the vast majority of its export earnings. The sector has long faced infrastructure challenges, including unreliable power and gas supplies, which periodically disrupt production. The current gas crisis is the latest in a series of energy-related setbacks that have forced factories to adjust schedules and, in some cases, declare temporary holidays. The dispute with LPP centers on orders placed by FES, a separate legal entity to which LPP sold its stake in its Russian business in 2022 as part of its withdrawal from the market. Roughly 40 Bangladeshi suppliers claim FES owes them money, and they argue that LPP must assume responsibility because LPP had done business with FES based on LPP's assurances. LPP, whose annual sourcing volume from Bangladesh exceeds $700 million, maintains that it has met all obligations to suppliers on time and that any claims of outstanding payment liabilities are “false and constitute disinformation.” In July, the owners of two buying houses filed separate High Court cases against several officials in LPP's Dhaka office to recover unpaid dues from FES. After the cases were filed, police conducted nighttime raids at the homes of several LPP officials, prompting the retailer to scale back its sourcing in Bangladesh temporarily. LPP said it has “repeatedly providing explanations” but continues to face attempts to “improperly attribute responsibility for FES's obligations” to the company. Why It Matters The energy crisis directly threatens Bangladesh's ability to meet export deadlines, which could ripple through global supply chains that depend on its factories for fast-fashion and other apparel. A 30-40 percent reduction in production capacity, as reported by the BGMEA, means delayed shipments, potential order cancellations, and financial strain on factories that operate on thin margins. For international buyers, this could mean longer lead times and higher costs, especially during peak seasons. The LPP dispute, meanwhile, underscores the fragility of buyer-supplier relationships in the garment industry. If the BKMEA follows through on its threat to blacklist LPP and take the matter to the European Union and global buyer networks, it could set a precedent for how payment disputes are resolved. The conflict also highlights the legal and operational risks for foreign retailers operating in Bangladesh, where local courts and police actions can quickly es