The chemical industry faces an unprecedented price increase and raw material supply tensions

As a reminder, already since the end of 2020, and throughout 2021, the main downstream chemical manufacturers grouped together within FIPEC and representing the unions SIPEV, AFICAM, AFEI, AFCALE and SPB (manufacturers of paints, coatings, varnishes, glues, mastics, printing inks, colors, wood protection, etc.) have been subjected to unprecedented pressure on raw materials, which has manifested itself in:

• the sharp increase in the cost price of products which drastically compresses margins;
• limited access to certain raw materials requiring arbitration where technical alternatives were not available;
• the activation of an emergency plan to continue to deliver to all customers as best as possible on time;
• the need to transfer price increases downstream when certain thresholds are crossed.

The war in Ukraine causes a brutal generalization of tariff increases on production costs

With the war in Ukraine and its consequences on the cost of energy (gas and oil) whose prices are exploding, the manufacturers represented by Fipec have suffered since mid-February from unprecedented inflation in the costs of all production items. .

• The raw materials used in the manufacture of chemical mixtures are all subject to a sharp price increase: substances from mineral chemistry, mainly used as pigments, and substances from organic, petro-sourced or bio-sourced chemistry, produced from highly electro-intensive industries, are subject to considerable price increases. The titanium dioxide situation is particularly sensitive. Alkyd resins, isocyanates, epoxies, certain acrylic resins, certain solvents (MEK, MIBK) are particularly under tension. Almost all FIPEC member companies are experiencing supply difficulties for titanium dioxide, nitrocellulose, ethanol, ethyl acetate, ammonium polyphosphate, acrylic emulsions, cellulose ethers, alkyd resins, urethane, PU hardeners, fumed silica, talc, barite, etc.
• The packaging required for packaging products is increasing excessively sharply: for plastic packaging, as for metal packaging. The cost of wooden pallets is reaching historic amounts.
• The cost of energy is rising: like all economic players, FIPEC members consume energy in their manufacturing process and are directly affected by the explosion in energy prices.
• The transport of goods is becoming critical: the cost of fuel and the availability of transporters are under great pressure.

No positive outlook envisaged in the short and medium term: Fipec calls for solidarity between sectors and responsibility of all actors

Fipec, heard at the beginning of 2022 by the business mediator as part of the consultation of the construction sector, or involved in the strategic committees of the chemical sector and construction industries, calls on all players to show solidarity between sectors.

Until now, manufacturers have taken the shock on themselves by proposing, sometimes with difficulty, price increases that are controlled and measured in relation to the downstream's ability to absorb them, out of all proportion to the collapse in margins caused by soaring commodity price increases.

The extension of the duration of the raw materials crisis and the sharp increase in their prices, accompanied by the historic compression of margins, will make it essential to pass on price increases throughout the value chain, leading to much more frequent updates.

To preserve the same level of quality and richness of the industrial fabric of the French sector, it is now crucial that all players, from the smallest to the most important, from upstream to downstream, neutralize the balance of power structural measures in favor of a pragmatic and responsible approach, as opposed to speculative or opportunistic approaches which are still too frequent.

Direct effects are to be expected on the many downstream markets of this industry: the printed packaging markets of all sectors, including the agri-food sector, the construction and renovation sector, the marine anti-corrosion markets and industrial, automotive, etc.

The ability of industry players to react positively to Fipec's call for responsibility will be decisive in ensuring the survival of a large proportion of Fipec's SMEs and ETIs, and therefore contribute to the country's reindustrialisation objectives.