In a statement released yesterday evening, 10 March 2021, the National Union of Italian Manufacturers of Tanning Auxiliaries-UNPAC talks about the difficult situation for the sector because of the price increase of raw materials due to various factors including the increase in transport costs. However, also compliance requirements linked to the REACH and CLP regulations as well as the “tax to sell, imposed by structures such as ZDHC” which orders onerous analyses for the registration of chemical products on the portals weigh on the company balance sheet.
UNPAC’s press release follows below
A wave of force majeure declarations by European and Asian suppliers is creating a difficult situation for companies in the chemical sector. At the same time, in recent weeks, there has been a shortage of imports from the Middle and Far East, a situation aggravated by the increase in transport costs, which is causing changes in trade, especially in commodities, where the incidence of freight rates is more pronounced.
In a recent study published by Freightos Baltic Index, we read that container inflation could cause an increase in the cost of imports to Europe by + 2.3% if sea freight rates remain at high levels for a long period of time; it is estimated that the freight rate for a standard 40-foot container transported by ship from the Far East to Europe has gone from $ 2,100 in November 2020 to $ 7,800 in February 2021. A phenomenon that will not normalise in a short time; in fact, it is believed that the current level of freight rates coult be kept throughout the first and also the second quarter of the current year.
Moreover, the evaluation of the oil price, as well as of the myriad of substances and intermediate materials that through subsequent and complex manufacturing processes are used in chemical formulae for final products, the unfavourable regulatory context, the costs that chemical companies have undergone and will sustain for REACH with compliance requirements related to analyses and registrations, investment costs in technology and ever more eco-sustainable product research and the very demanding climate policies outline recession scenarios and lack of profitability for the chemical-tanning sector.
One must also consider that the same raw materials are not undergoing any depreciation, as the demand for them is still growing worldwide with a consequent price increase; added to this dynamic is the policy of those who hold, in some cases in a monopoly regime or, worse, with the creation of cartel situations between competitors, the production of certain and strategic chemicals that at the moment do not declare the intention to carry out a price decrease.
Last but not least, the commitment to REACH and the CLP regulation is, on the contrary, very incisive on business costs with significant burdens for chemical companies both in regulatory compliance and in the registration of substances necessary for the production of their own formulae; due consideration must also be given to the “tax to sell” imposed by private structures such as ZDHC, with the obligation, thanks to the agreement with LWG, to carry out costly analyses and registrations of the tanning auxiliaries on the various portals, this naturally without the guarantee of objective methodological findings. This entails for companies the need to perform innumerable and expensive chemical internal and external analyses, in order to exclude the presence of certain substances as required by the many specifications, entailing for chemical companies a constant commitment with investments in qualified personnel, technology, research and development of eco-sustainable products, in order to satisfy the demands and needs of the end market.
edited by UNPAC