Retailers monitoring situation as Iran conflict pushes up chemical and packaging costs

One of South Africa’s largest supermarket chains said the full impact of the conflict in the Middle East had not been felt yet.

Roughly seven weeks since hostilities began in the Middle East, ripples are being felt in the manufacturing sector.

Another fuel price increase may be on cards, while suppliers of chemicals and packaging plastics have warned clients to plan ahead.

The escalating cost of materials and transport could soon be felt even harder by consumers, with retailers saying they are monitoring the situation.

A ceasefire between the United States and Iran was agreed to last week, but negotiations between the US and Iran in Pakistan ended in a stalemate.

As of Wednesday, the United States had implemented a blockade of the Strait of Hormuz, aiming to suffocate Iran’s shipping abilities.

Solvents and plastics affected

In a circular seen by The Citizen, a national solvents supplier also told its clients there would be varying increases in chemicals vital to household consumer goods.

“Ongoing geopolitical tensions in the Middle East continue to disrupt key shipping routes and oil supply chains. Combined with rising global crude oil prices and the weakening of the rand against the dollar, these pressures have driven up solvent costs significantly,” the notice reads.

The solvents include methanol, benzine, xylene, acetone, toluene, n-propanol and alchol solvent.

These chemicals are used in a wide variety of household products such as toiletries, personal care products, detergents, varnishes, paints and more.

Additionally, clients of an East Rand packaging company were alerted to April price increases.

The company warned that deliver timelines could be affected, with prices set to change at short notice.

“The plastic industry is currently experiencing significant instability due to ongoing supply shortages and unpredictable cost increases.

“Due to market volatility, we are unable to guarantee or hold pricing. Customers are encouraged to plan as material shortages may impact manufacturing timelines as well as pricing,” a separate notice shown to The Citizen reads.

This particular supplier increased polypropylene strapping by 10-21%, pallet wrap by 31%, ziplock bags by 15%, bubblewrap by 35% and virgin plastic bags by 31%.

No retailer panic

The Spar Group acknowledged the global supply chain challenges and said the “dynamic and unpredictable environment” was a unique scenario.

However, the group said that the effects of the Middle East conflict had not yet reached South African shores, adding it will act when necessary.

“While some upstream cost pressures – including those related to chemical-based inputs and packaging – are emerging globally, the full extent and potential impact on local pricing is not yet clear.

“We continue to monitor developments closely and remain in regular engagement with our supplier and distribution partners to manage any potential risks,” Spar told The Citizen.

Woolworths relayed that its primary objective was the protection of its supply chain and ensuring its customers had access to the products they had become accustomed to.

It said that rising costs were “significant” and it was “assessing the implications” facing its operations.

“We are committed to mitigating cost pressures wherever possible, leveraging efficiencies across our operations to limit the impact on customers.

“We are equally mindful of the pressures these developments may place on our people and we are making every effort to navigate this period responsibly and with care,” a Woolworths spokesperson told The Citizen.

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