The conflict in the West Asia is seriously affecting India’s economy, various industries and sectors. The ongoing war has disrupted the energy markets and global shipping routes, causing unexpected cost increases across multiple industries, such as textiles, mining, steel manufacturing, and consumer goods.
The ripple effect from the West Asia’s war is starting to be felt along the entire global supply chain; for instance, through petrochemicals, fuel price inflation, and shipping disruptions directly off the coast of Iran, around the Strait of Hormuz–one of the world’s major energy choke points.
Industry experts expect these indirect effects will continue to add upwards pressure on production costs across a wide array of products that are used daily .
Petrochemical price surge hits manufacturing
Some of the most significant pressures are coming from the chemical and petrochemical industries that produce primary input materials for many manufacturers. For example, inputs used in the textile industry, as well as input materials used to produce plastics, packaging materials and much more.
The War in West Asia has caused a structural adjustment in the pricing of all globally traded commodities in chemical markets. Dozens of commodities have experienced significant price increases due to shipping route disruptions resulting from the War.
Many commonly produced chemicals are also continuing to rise in price. Examples include Maleic Anhydride used in Auto and Construction (up over 60%), Ethylene — a key building block for plastics such as Polyethylene and PVC — (up over 35%), and Acrylic Acid (used as an ingredient in various adhesives, paints, hygiene products and textiles) (surged over 30%).
Numerous chemicals are derived from Petrochemical feedstock that are linked directly to crude oil and natural gas, therefore, when energy price increases are experienced, the ripple effect quickly travels throughout the entire Supply Chain of Industry.
Textile and packaging sectors under pressure
As the Textile Industry in India has experienced.
Manufacturers rely on multiple processes such as Dyeing, Bleaching, Finishing, all of which require incredible amounts of Energy, thus, as Fuel Prices increase, Manufacturing Costs are increasing. At the same time, Petrochemical Raw Material Inputs used to create the Chemical & Dyeing Products utilized in the Textile Industry are now extremely more expensive.
For instance, Polyester has been one of the most commonly supplied Synthetic Fibers and has experienced approximately a 15% Increase in Price with Industry Experts warning that prices will continue to rise.
Additionally, Packaging Costs have also increased. Throughout the Textile Industry, many consumers rely on Plastic Packaging that is made from Petrochemicals therefore as the Packaging Materials have increased by as much as 100% within the last few weeks.
The increasing cost of small parts for clothing like zippers, labels and buttons is being attributed to the rising cost of the raw materials used to manufacture them (the vast majority of which are made from plastics).
Steel, mining and logistics disruptions
Rising prices due to disruptions in the Mining & Steel industry are also becoming evident.
Mining, which is very machine and transport fuel dependent for extraction and moving from underground to surface, is seeing very significant cost increases due to the rising cost of diesel fuel.
The steel industry is also suffering due to increasing cooking coal prices for blast furnace steel and since India imports 95% of its total requirements, the steel industry will be very vulnerable to changes in global supply.
There are reports from industry sources that coking coal prices are rising due to shipping delays related to increasing tensions in the Gulf and current trade routes.
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Energy worries and LPG anxiety
The conflict is creating immediate concern regarding the availability of LPG (cooking gas) in India.
Several cities are reporting people lined up for long hours outside of the gas stations in fear that there will be an LPG shortage as a result of increasing energy prices.
The government, however, has said there is currently no LPG shortage and strategically held reserves can satisfy demand for at least several weeks.
The government has also taken steps to ensure that there is no hoarding of gas by prioritizing Home LPG distribution and tightening distribution rules.
Experts predict the economic environment surrounding us will heavily depend upon how long the geopolitical situation continues. However, initial indicators point toward a rapid spreading of economic impact from the events occurring due to the conflict in India’s manufacturing supply chains.
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