Food and drink manufacturers have warned that they face unsustainable hikes in raw materials and energy costs as oil prices continue to soar.
Rocketing oil prices are hitting prices for petroleum-based products, from plastic packaging and chemicals to electricity and diesel, according to one senior executive at a consumer goods supplier.
“The price of polythene has doubled in the past four months alone and the situation could change quickly,” he said. “Anyone who buys plastic bottles will be particularly vulnerable. Prices have gone up 40% year on year. And that’s on top of rising electricity and diesel costs.”
The executive added: “We are already running a very tight ship. There is little room for manoeuvre on margins.”
The problems are being compounded by a surge in
demand from China, which is consuming huge amounts of oil and oil-based products, he said.
“China is taking more of the world’s supply, which is also putting up prices, particularly in the chemicals industry, where a lot of spare capacity has recently been taken out.”
Merrill Lynch analyst Nick Sochovsky said: “It depends on suppliers’ exposure to petroleum-based products as to how much they are being affected. Nestlé could have done without it, if you look at its results this week. But pretty much everyone is being walloped at the moment.”
The government’s output price statistics for July show that petroleum-related products have increased by 8% over the past 12 months.
Packaging and energy typically account for approximately 15% of food manufacturing costs, while chemical raw materials can add a further 35% for household products, according to one supplier.
“With the US oil majors forecasting an average price of $41 a barrel for the rest of this year, up nearly 50% compared with one year ago, the pressure for price increases is likely to intensify,” the supplier warned.
Elaine Watson
Rocketing oil prices are hitting prices for petroleum-based products, from plastic packaging and chemicals to electricity and diesel, according to one senior executive at a consumer goods supplier.
“The price of polythene has doubled in the past four months alone and the situation could change quickly,” he said. “Anyone who buys plastic bottles will be particularly vulnerable. Prices have gone up 40% year on year. And that’s on top of rising electricity and diesel costs.”
The executive added: “We are already running a very tight ship. There is little room for manoeuvre on margins.”
The problems are being compounded by a surge in
demand from China, which is consuming huge amounts of oil and oil-based products, he said.
“China is taking more of the world’s supply, which is also putting up prices, particularly in the chemicals industry, where a lot of spare capacity has recently been taken out.”
Merrill Lynch analyst Nick Sochovsky said: “It depends on suppliers’ exposure to petroleum-based products as to how much they are being affected. Nestlé could have done without it, if you look at its results this week. But pretty much everyone is being walloped at the moment.”
The government’s output price statistics for July show that petroleum-related products have increased by 8% over the past 12 months.
Packaging and energy typically account for approximately 15% of food manufacturing costs, while chemical raw materials can add a further 35% for household products, according to one supplier.
“With the US oil majors forecasting an average price of $41 a barrel for the rest of this year, up nearly 50% compared with one year ago, the pressure for price increases is likely to intensify,” the supplier warned.
Elaine Watson
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