Strategy - Iran War Checks: Supply Intact; Cost Inflated by Elara Capital
We conducted extensive channel checks with small companies, raw material suppliers and other channel partners across industries post-Iran war break out. Our findings: no supply disruption, but widespread price hikes, extended lead times, and planning uncertainty. Most firms rely on legacy inventory, and curtailing fresh buys. China supplies are stable and Europe freight and select air routes are costlier. Prices have been softening lately but remain elevated vs pre-war levels. Companies are balancing partial price pass-throughs with margin squeezes.
No supply breakdown; but price volatility increases: Our initial checks across fertilizers, chemicals, agrochemicals, metals, consumer, and pharmaceuticals show price volatility and logistical friction over outright disruption. Most channel partners report materials are available, but at higher prices, longer lead times, and shipment uncertainty. Notable price surges: Tiles manufacturing where spot gas jumped from INR 49 to INR 90 (now to INR 73); detergent makers report Linear Alkyl Benzene Sulphonic Acid (LABSA) rising from INR 120/kg to INR 300/kg; paints manufacturers report styrene doubling from INR 62–65/liter to INR 120–125/liter, and TiO? from ~INR 235/kg to ~INR 280/kg; and apparels sees fabric up ~12–15% and yarn by 15–18%.
Companies lean on legacy inventory, curb new purchases: Most companies have adequate inventory for the next few weeks / months, but procurement teams are on alert and are re-evaluating sourcing strategies, including diversifying vendors and geographies. Overall, the situation is being treated as a cost and planning hurdle rather than a supply crisis. Importers are reluctant to commit to long-term contracts at current prices, expecting normalization, but are forced to spot buy for immediate needs.
China raw materials supplies stable; Europe freight spikes: Our checks confirm no disruptions in China raw materials supply -- critical especially for chemicals and pharmaceutical sectors -- with only a slight increase in freight rate. However, supplies from Europe see a significant rise in freight cost. Some exporters have taken a hit, due to higher air freight hike, given Middle East route disruption.
Mixed second-order impact: Our checks reveal varying ripple effects across value chains; in the alco-beverage segment, extra-neutral alcohol (ENA) and grain, prices have softened while glass has gone up. In fertilizers, phosphoric acid prices were contained as ammonia shortage is hindering further processing and is causing temporary oversupply. Many companies report sharp increase in packaging cost, adding to product cost.
Prices start to soften but remain elevated above pre-war levels: Companies indicate prices have started to soften after the initial surge, although they remain significantly above pre-war levels. This is most visible in gas prices that have come off, and the supply situation improved in the past 3-4 weeks. Chemicals and pharmaceuticals ingredients prices have following suit, as per our checks.
Patchy price pass-through: While some companies with pricing power or shorter contract cycles are pushing for hikes, others are absorbing, treating it as a temporary margin problem, where firms are balancing revenue vs volume risk. Tiles manufacturers have raised tile prices by 18–20% with some taking a hit on demand. Paint prices have been hiked at 8–10%, squeezing margin, and hitting smaller firms hard. In apparels, price pass-through has been limited to 3–4% to date.
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