SUPPLIER PRICE HIKES AMID INFLATION: LAW, NEGOTIATION AND MEDIATION
Supply chain disputes have become a central business risk for globally integrated companies. What were once primarily commercial disagreements over pricing or delivery obligations can now rapidly escalate into operational crises capable of disrupting production, damaging customer relationships and threatening entire manufacturing programmes. Over the past six years, the coronavirus (COVID-19) pandemic and various geopolitical hotspots have fundamentally altered this landscape. The conflict in the Middle East and the ongoing blockade of the Strait of Hormuz is the latest confirmation that volatility in global trade flows, logistics, energy markets and raw material availability has become the new baseline for operations rather than a temporary exception.
Geopolitical volatility often translates directly into increased tension and disruptions along the entire supply chain. The blockade of the Strait of Hormuz is a prime example. Energy market volatility directly increases shipping and manufacturing costs. In addition, important raw materials such as urea, a core component of fertilisers, and helium as well as other chemical solvents needed for chip manufacturing can no longer be shipped out of the region, leading to shortages and higher prices. Suppliers increasingly seek to pass these costs on to their customers, creating a ripple effect of price increase requests along the entire supply chain.
In such a situation, the transition from a collaborative partnership to a high-stakes confrontation that risks the underlying relationship can be swift. In negotiations regarding price increases, some suppliers exert leverage by threatening to suspend deliveries, often citing the customer’s alleged unwillingness to cooperate regarding the requested cost increases as a justification for non-performance. For manufacturers reliant on just-
Jul-Sep 2026 issue
Hogan Lovells International LLP