Packaging sector in wait-and-watch mode despite war pressure

Manoj Mehta, a sector observer, noted that business sentiment is "subdued, particularly regarding cross-border trade and international shipments," but stressed that operations are largely continuous. The conflict's indirect effects, however, are intensifying. Unpredictable freight movement, extended transit times, and surging insurance premiums are prompting companies to closely monitor shipments and actively diversify their supply base across regional, Asian, and European markets.

One pharma exporter specialist highlighted the severe consequences of insurance companies cancelling war risk clauses, describing it as a "huge issue." The financial maths is stark: the loss of even a small fraction of goods could potentially wipe out "an entire year's profit," creating a risk scenario that is uniquely severe and uninsurable under current terms.

Separately, rising crude prices are translating directly into cost-of-goods-sold (COGS) pressures for manufacturers. As Ravi Kapoor from PwC India pointed out in a business forum, almost all packaging materials — from PET bottles to laminated wrappers and polyethylene containers — are petrochemical derivatives whose costs are globally indexed to crude oil. News editor at PrintWeek, Sai Deepthi confirmed that "those industries pass on pricing changes quickly," forcing downstream manufacturers to absorb or mitigate the volatility.

The stakes for margins are high. Packaging materials alone account for 12 to 18 per cent of the COGS for a manufacturer, with diesel-linked logistics adding another 6 to 8 per cent of sales. Abhay Avadhani of WhatPackaging magazine suggests that if crude sustains above USD 120 per barrel, fast-moving consumer goods (FMCG) firms may be compelled to implement calibrated price hikes of 1%–3% to offset margin pressure.

In the ceramics industry, major hubs such as Gujarat's Morbi depend on imported LNG and propane to fire their kilns. Gas distribution companies have already invoked force majeure clauses, restricting supplies below contracted volumes. The president of the Morbi Ceramic Manufacturers Association, Manoj Arvadiya, said, "Talking about the current war between Iran, Israel, and the United States, and the subsequent wars in all the GCC countries: most gas and petroleum products come from the GCC countries. The entire gas supply for the Morbi ceramic industry, which relies on gas, comes from the GCC countries." Arvadiya added, "There is a gas shortage in Morbi. If the gas supply is inadequate, we anticipate that the entire Morbi Ceramic Industry will have to shut down."

Paint manufacturers face a similar squeeze, as crude-linked derivatives are a key production component, accounting for nearly 30% of their production costs. Shares of Asian Paints, Berger Paints, and Kansai Nerolac are in decline due to the cost pressures. In the FMCG sector, companies such as Hindustan Unilever, Marico, and Dabur, which have portfolios of mass-priced personal and home care products, are vulnerable to oil price shocks that affect plastic packaging, paraffin, and mineral oils.

Among the companies that may require the largest price increases are Asian Paints, Hindustan Unilever, Godrej Consumer Products, Varun Beverages and Britannia Industries. In contrast, companies such as Colgate-Palmolive (India), Nestle India, ITC Limited, United Spirits and Radico Khaitan are expected to be relatively less affected.

Despite these headwinds, the medium-term outlook for the packaging market remains positive. Demand is steady, driven by rising consumption, strong retail, and expanding manufacturing sectors. While businesses remain watchful in India and the Middle East region, as a friend of PrintWeek based in Dubai shared a personal anecdote: "All okay; the only change is, looking up not down while driving or walking".