High Crude Prices Are Passing Through the Coatings Chain as More Than 20 Companies Launch Price Increases

The impact of the Middle East conflict on the coatings industry is no longer confined to the upstream level of “tight raw materials,” but is now continuing to pass through the entire chain of crude oil, petrochemical monomers, resins, solvents, additives, and finished coatings. Recently, multiple energy and chemical companies publicly disclosed that the Middle East situation has clearly disrupted global oil, gas, and petrochemical supply. Since March, shipping through the Strait of Hormuz has been obstructed, refining and petrochemical operations in the Gulf have come under pressure, and international crude oil prices once returned to around US$100 per barrel. Reuters reported that the Iran war has severely disrupted petrochemical and crude transport through the Strait of Hormuz, pushing plastics and other petrochemical prices to multi-year highs, while Asian refining margins have also surged to nearly four-year highs amid supply disruptions.

Against this backdrop, the cost structure of the coatings industry has been directly hit. Coatings production does not mean “buying oil to make paint” in any simple sense, but its core raw materials — including resins, emulsions, solvents, certain additives, and isocyanate systems — are all highly linked to crude oil and its derivative chains. As long as crude oil, naphtha, propylene, aromatics, and natural gas rise together, key raw materials such as BA, 2-EHA, MDI, TDI, epoxy resin, and neopentyl glycol can hardly remain untouched. Recent public market information shows that BASF has already raised BA and 2-EHA prices in Asia-Pacific, while Wanhua Chemical has also invoked force majeure for part of its Middle East supply due to the severe disruption of shipping through the Strait of Hormuz. This indicates that upstream players are not merely “concerned about rising costs,” but are already rewriting quotations and delivery arrangements under a new cost structure.

That is why, since March, price increase letters from domestic coatings, waterproofing, and adhesive-related companies have suddenly become much more frequent. On the surface, it looks like downstream companies are “following upstream price hikes.” But a more accurate way to describe it is that costs previously absorbed by the middle and lower parts of the chain are now being passed on in concentrated form to end markets. When upstream monomer and resin prices rise rapidly, many formulation-based companies usually try first to absorb part of the shock through inventory, long-term contracts, purchasing rhythm, and profit buffers. But this round is different from the past. The cost increase is not a single raw material fluctuation; logistics, energy, raw materials, and supply expectations are all rising at once. Reuters recently reported that petrochemical supply disruptions caused by the Iran war have pushed prices sharply higher across multiple regions, with some companies raising prices by as much as 50%. That means what is putting pressure on coatings companies now is not one single input, but the cost center of the entire formulation system moving upward.

From the raw material side, this transmission has already become very concrete. Since early March, BASF’s move to raise BA and 2-EHA prices has already sent a clear signal to the coatings and adhesives chain. BA and 2-EHA are key monomers in architectural coatings, industrial coatings, emulsions, and pressure-sensitive adhesive systems. Once mainstream suppliers raise prices, downstream companies can hardly avoid following. At the same time, BorsodChem, Dow, and others in Europe have also successively raised MDI prices, showing that the isocyanate chain is likewise under pressure from both energy and raw materials. For the coatings industry, this means that both waterborne systems and polyurethane systems are simultaneously feeling upstream pressure, rather than only one specific segment being affected.

What is worth noting is that this round of price increases is not being transmitted with the same intensity across all companies and all fields. The coatings market has already begun to show clear divergence. Some companies serving home decoration, automotive, and high-end industrial applications have stronger tolerance for rising costs, because these sectors are better able to accept premiums associated with product performance, service, and delivery stability, leaving more room for price adjustment. Other segments, especially traditional industrial coatings, waterproofing, and certain construction-material applications, are more easily trapped in the passive situation of “raw materials rising quickly while finished product prices rise slowly.” This is because downstream customers in these areas often focus more on absolute price, while project budgets and contract cycles are more rigid, making cost pass-through far less smooth. In other words, even under the same raw material inflation, different downstream segments are not bearing the same margin pressure. That is why some companies in the coatings chain have already issued multiple price increase notices, while others are still relying on inventory and wait-and-see strategies to maintain short-term price stability. Based on Reuters and public industry information, this divergence is not unique to China, but a common response across global petrochemicals and downstream manufacturing during a cost shock phase.

From the perspective of corporate operating logic, the fact that more than 20 domestic coatings-related companies have announced price increases actually points to a more practical problem: the old pricing system is becoming less and less able to cover the new cost structure. When epoxy resin, BA, 2-EHA, MDI, TDI, asphalt, and solvent raw materials all rise in the same period, if companies continue supplying at the old prices, their margins will be compressed very quickly. The reason some listed companies can still keep prices unchanged in the short term lies to a large extent in their inventory cycles and capital strength, not because raw materials have not actually risen. Inventory can delay price increases, but it cannot eliminate them. Once inventories are drawn down below safe levels while raw material prices remain elevated, companies will still have to face the issue of repricing. The price increases already seen in waterproofing, emulsions, and polyurethane materials also show from another angle that this round of adjustments in the coatings industry is not an isolated event, but the natural result of a broader revaluation of costs across the chemical chain.

Judging from the current market rhythm, the future price trend in the coatings industry will still depend mainly on oil prices and the recovery of traffic through the Strait of Hormuz in the short term. If the Middle East situation continues to fluctuate and shipping recovery remains slow, then high crude prices, high freight rates, and high insurance costs will continue pressing on petrochemical raw materials and imported supply, which means raw material prices for coatings will most likely remain elevated and volatile, while finished product prices will also remain “easier to rise than to fall.” If the supply chain gradually recovers, some raw materials that rose too quickly in the early stage may correct, but the room for correction may not be enough to return to the pre-conflict cost center. That is because the market is no longer facing only a spot shortage issue, but also higher risk premiums and more cautious procurement expectations.

Looking over a slightly longer time horizon, the impact of this wave of price increases on the coatings industry will not stop at “raw materials have become a bit more expensive.” It is more likely to accelerate further differentiation within the industry. One group of companies will use their strengths in brand, channels, technology, and capital to pass through costs more quickly, while using the opportunity to strengthen customers and market share. Another group may face greater operating pressure during this round of volatility because they lack both upstream bargaining power and downstream pricing room. In other words, the crude oil crisis is not only pushing up coatings prices, it is also reshuffling which companies are capable of getting through this high-cost cycle. For the industry, that may be even more important than any single round of price increases itself.