Rising crude oil prices amid the ongoing West Asia conflict are beginning to push up input costs across several industries, triggering concerns of price hikes in sectors such as tyres, textiles and fast-moving consumer goods (FMCG).
Industry players say the surge in crude prices is already raising production costs, and if the geopolitical tensions persist, companies may have little option but to increase prices.
The tyre industry is also facing rising input costs as crude-linked materials and natural rubber prices move higher. Analysts say manufacturers may eventually resort to price hikes if cost pressures persist.
“If the current situation continues, price increases may become inevitable. The extent and timing remain uncertain as it is difficult to predict how long the geopolitical tensions will last and where crude oil prices will eventually settle,” said Poonam Upadhyay, Director at Crisil Ratings.
Tyre manufacturers are likely to evaluate the minimum price increase required to offset rising costs while limiting the impact on consumers.
The textile sector is already witnessing sharp increases in the cost of synthetic fibres, which are derived from petrochemicals. Rising crude prices have pushed up the cost of polyester and related materials used widely in apparel manufacturing.
“Higher crude prices directly increase fabric and manufacturing costs,” said Abhishek Sharma, CEO and co-founder of Fashinza, noting that prices of some synthetic fabrics have already increased by 10–15%.
Thread manufacturer Coats India has informed buyers of a 12% price increase effective March 20, citing higher raw material and energy costs. Industry executives said polyester staple fibre prices have surged by 25–30%, while plastic packaging costs have risen by around Rs 15,000 per tonne.
However, exporters say some companies may initially absorb the higher costs to remain competitive in international markets.
FMCG companies are also feeling the impact of rising crude prices as petrochemical-based packaging materials become more expensive. According to industry sources, some companies may resort to reducing pack sizes instead of raising retail prices immediately to manage cost pressures.
The fertiliser sector, which is heavily dependent on imported liquefied natural gas (LNG) for urea production, is closely monitoring supply disruptions from the Middle East. While the industry is currently trying to manage costs through diversified sourcing, prolonged price pressure could eventually reflect in fertiliser costs.
“India has diversified supplies and long-term arrangements and is sourcing from nations such as Morocco, Jordan, Saudi Arabia, Russia and Belarus, which partially offsets supply disruption risks from one region,” said a spokesperson for the Fertiliser Association of India (FAI).
The industry is also working with the government to prioritise gas allocation for urea production. With some plants currently under annual maintenance, fertiliser companies are optimising gas usage to ensure sufficient supply for the upcoming agricultural season.
Increase in prices may hit government finances as higher allocation has to be made for fertilizer subsidy.
Globally, governments and industry players are exploring ways to stabilise supplies as tensions in the Strait of Hormuz threaten key crude shipping routes.
“Large strategic reserves in countries like China and diversified suppliers—including Saudi Arabia, the UAE, Venezuela and Africa—are expected to stabilise supply and limit long-term price pressures,” said Sourav Mitra, Partner, Oil & Gas, Grant Thornton Bharat.