ELIXENS Raw Materials costs update 01-2013


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   -  16/01/2013
2013 : PRESSURE PERSPECTIVE ON RAW MATERIALS COSTS

economie-bassie des marchés

Buyers of aromatic flavor and fragrance compounds will remember 2012 as still another difficult year, pursuing in the structural trend.

The reversals of market cycles in 2012 have had a beneficial effect on raw material prices:

 

  • As a result of a sharp decline in economic activity in Europe and a general slowdown in Asia and America, prices have come to a still for many synthetic raw materials and commodities.
  • This decrease in demand combined with good crop results have also caused prices to decline for certain essential oils, some major ones like Orange and Lavender essential oil.

Unfortunately, these same phenomena, favorable to certain raw material costs, were offset by upward trend factors resulting from:

  • Demand from emerging countries especially on basic natural raw materials.
  • Global world inflation driven by competing activities in the production of raw materials (subsistence crops, tourism, construction ...)
  • Natural disasters such as successive periods of frost and drought in Central Europe, major earthquakes in China, various occurrences of typhoons and floods that hit the Philippines and Indonesia.
  • Structural rise in energy costs, which affects the very energy-consuming production process of raw materials, from harvest, through distillation to delivery of the finished lots.
  • Transportation costs, road and air freight, have suffered a significant increase in 2012 and will most likely be repeated in 2013.

Meanwhile, new institutional factors result in even more inflation:

  • Regulatory constraints applied to aromatic raw material producers and fragrance and flavor industrials were greatly magnified in recent months and now affect production costs significantly.Certification processes (be it quality, food safety, good manufacturing practices, good hygiene practices, fair trade certification, regular audits) consecutive to the legitimate demands of end-consumers in terms of product safety, transparency and environmental & social values respect ​​generate extra costs.
    • REACH Consortium for the creation and registration of all aromatic materials has been activated. Funding has been supported by the European producers and importers.
  • Certification processes (be it quality, food safety, good manufacturing practices, good hygiene practices, fair trade certification, regular audits) consecutive to the legitimate demands of end-consumers in terms of product safety, transparency and environmental & social values respect ​​generate extra costs.

tableaux-evolution en 

economie-coinsIn summary, based on current economic forecasts of moderate or pessimistic global growth, we expect a relatively stable price of synthetic raw materials. Natural raw materials will fluctuate in direct correlation with supply and demand. Therefore we advise to watch carefully the combination demand / harvest levels / possible speculative phenomena. All related costs to the raw material costs will be strongly inflated.

Edited by ELIXENS SA headquarters

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