Many chemical raw materials belong to the downstream industry chain of petroleum, and with the continuous soaring of oil prices at the source, the first-level transmission has also made various cleaning products such as shampoos, shower gels and cosmetics such as creams, lotions, makeup, etc. The rising prices of raw materials and packaging materials have put pressure on many domestic manufacturers.
In the cosmetics industry, plastic packaging products are the most closely related to petroleum.
Kong Lingqing, an analyst at Treasure Island, an information analysis agency for the petrochemical industry, said that the rise in crude oil prices will first affect chemical products such as asphalt, fuel oil, PP (polypropylene), PE (polyethylene), and ethylene glycol.
Among them, PP and PE are widely used in cosmetic packaging materials.
From past experience, the price trend of crude oil is positively correlated with the price of plastic-related products.
Therefore, as crude oil futures prices continue to rise, the prices of related plastic products will continue to rise.
The impact of crude oil on the cosmetics industry is not only reflected in the packaging materials, but also in the cosmetic raw materials - in addition to plant extracts and other ingredients, many cosmetic raw materials are related to petroleum extracts or their derivatives and compounds.
Li Xiaohu, chairman of Shanghai Oli Industrial Co., Ltd., told Yicai.com that raw materials related to crude oil have risen several times since the epidemic before this round of rises.
In the past year, the average growth rate of related basic raw material products is 15%-30%, and after the conflict between Russia and Ukraine, the soaring crude oil has also put pressure on relevant domestic manufacturers again, "For example, our two major businesses, one It is an active agent, which has little impact; but another amino acid product, because it uses oil-related extracts and synthetics, has a great impact." According to him, the latter's related products have risen in the past year. 60%-70%.
In addition, Li Xiaohu told reporters that for cosmetics companies, in addition to crude oil, the prices of other related oil varieties have also soared, which has a great impact, such as sunflower oil.
Ukraine is the largest exporter of sunflower oil in the world. Now the tension between Russia and Ukraine has made it impossible for Ukraine to export sunflower oil temporarily. "One oil is hard to find" in the market. Manufacturers are looking for other alternative varieties, such as palm oil and coconut. Oil, which has also led to a rise in the price of related oils, making the cost of raw materials rise again.
How long will the rise in crude oil be communicated to cosmetic processors?
Li Xiaohu told the first financial reporter that for manufacturers like them, it depends on the materials and categories used.
"Cosmetics are relatively small in scale, and it is destined that many cannot sign long-term contract prices. Therefore, timely price changes of upstream raw materials have a great impact on current production and processing."
For international manufacturers, it may be necessary to continue to increase prices in the upstream, and they can follow the price adjustment, and the big manufacturers still have the bargaining power.
BASF’s official website recently announced that starting from March 15, 2022, BASF may increase the price of its personal care professional product line in North America by about 15%, if the contract/price agreement allows it.
"In order to compensate for continued market volatility and the supply of basic raw materials, other costs including domestic and transcontinental freight, energy and labor have risen," BASF said.
Even for manufacturers like Oli who have an advantage in the segmented field, it is not easy to raise prices with downstream brand merchants.
"The challenge for us is that you can't control the upstream price, and at the same time it is difficult to transmit the pressure of rising costs to the downstream." Li Xiaohu said that if we really want to raise prices, we usually talk about differentiation. If the upstream raw materials If the price continues to soar, then for the strategic cooperative major customers, the price will be increased selectively and within a moderate range, and for some temporary small orders, it will be discussed according to the actual situation.
The person in charge of a joint venture processing company also said in an interview with himself that in the current situation, it is difficult to negotiate price increases with downstream brands.
Usually suppliers are willing to absorb this cost by themselves and are not willing to raise prices with old customers and major customers. "The competition in this industry is too fierce. Once you raise the price, someone will use the original price to take your order, and your customers will lost."
"Cosmetic raw materials are highly dependent on foreign suppliers. For domestic manufacturers, we will develop high-tech products in the future transformation to increase the added value to cover and digest the rising cost." Li Xiaohu said .
As far as the current situation is concerned, some industry insiders predict that some cosmetic raw materials may continue to maintain high prices under the rising international oil prices.