Supply Chain Disruptions Contribute to Heightened Global Market Volatility in Q2 2025

This report summarises the key factors driving price changes at the end of Q2 2025, and into Q3 2025:

• Following the combined US-Israeli strikes on Iranian energy sites, Brent crude oil prices surged to $80/barrel by 23 June 2025, raising utility costs and putting pressure on biologics manufacturing margins. Iran and Strait of Hormuz Crisis – Impact on Pharmaceutical Supply Chain.

• On 4 June 2025, the US doubled Section 232 tariffs on steel and aluminium from 25% to 50% for all countries, except the UK (which remains at 25% under an interim agreement), likely increasing costs for stainless-steel bioprocessing equipment, lab equipment and medical devices.

• Hurricane Erick’s landfall on19 June 2025 on Mexico’s coast threatens major Mexican ports (including Veracruz, Manzanillo and Lázaro Cárdenas), risking short-term biologics supply delays and API import disruptions from APAC due to port closures and potential infrastructure damage.

Biologics contract manufacturing

Despite expanding global capacity, biologics CDMO prices remain elevated due to input costs, geopolitical energy shocks and ongoing pressure from US MFN drug pricing policies.

The global biopharma CMO market is expected to record a CAGR of 10.3% between 2025 and 2030, which is likely to lead to an increase in the cost of services.

• Pharma CDMOs are expanding capacity to support growing demand and enhance offerings.

In June 2025, WuXi Biologics (a China-based biologics CDMO) announced a large-scale microbial facility in Chengdu, featuring a 15,000L fermenter (scalable to 60,000L).

Hurricane Erick, which made landfall on Mexico’s coast on 19 June 2025, is expected to disrupt key ports including Veracruz, Manzanillo and Lázaro Cárdenas, which are crucial logistics hubs for Mexico’s exports including pharmaceuticals.

• Potential short-term delays for biologics supplies are anticipated, with extended disruptions, if infrastructure damage occurs.

On 13 June, Israeli strikes on Iranian energy infrastructure intensified geopolitical tensions, pushing Brent crude futures up by ~$5/barrel (~11%) to ~$74/barrel (the highest level since January 2025).

• As of 18th June 2025, the prices rose 16.9% M-o-M, driving up energy-related utility costs and CDMO operating expenses and likely putting pressure on biologics manufacturing margins.

In May 2025, the US administration issued an Executive Order on Most-Favoured-Nation (MFN) drug pricing, directing that Americans should not pay more for prescription drugs than the lowest price paid in comparable OECD countries.

• The order pressures pharma manufacturers to lower US drug prices to match the lowest prices in other developed nations, threatening their traditional pricing strategies and profit margins.

Bioprocessing supply

Bioprocessing supply costs exhibit mixed trends, with rising polymer feedstock prices and steel tariffs offset by easing equipment prices from China.

As of H1 2025, bioprocessing supply costs, particularly for single-use systems, are showing mixed trends.

• The single-use system (SUS) is composed of ~55% polymer-based raw materials, such as PE, PP, EVA and nylon.

• In May 2025, polypropylene (PP) prices declined 0.1%, while polyethylene (PE) prices dropped 0.7% compared to April 2025.

• The US high-density polyethylene (HDPE) prices fell 5.1% M-o-M in May 2025 (as compared to April 2025), providing modest cost relief for rigid bioprocessing components.

In June 2025, due to the renewed geopolitical tensions stemming from the Israel–Iran conflict, brent crude prices surged to ~$74/barrel, up sharply from $64.5 in May 2025.

• This 16.9% M-o-M increase is expected to reintroduce inflationary pressure on resin and polymer feedstocks, such as PE, PP and EVA, which are critical to single-use bioprocessing systems and lab reagent packaging.

As of 4 June 2025, the US doubled Section 232 tariffs on steel and aluminium from 25% to 50% for all countries, except the UK (which remains at 25% under an interim agreement); this is likely to increase the costs of stainless-steel bioprocessing equipment.

Deflationary pressures in China, marked by a 3.3% Y-o-Y decline in producer prices in May 2025, have made Chinese industrial goods, including equipment and components, more cost-competitive, potentially encouraging offshore sourcing in bioprocessing for improved cost efficiency.

Cell and gene therapy (CGT)

The CGT market witnessed a 20% Q-o-Q decline in activity in Q1 2025, with only 90 deals completed compared to 113 in Q4 2024, driven by reduced financing and alliance activity.

Further, consistent demand for CGT outsourcing has prompted suppliers to expand their capacity and capabilities through partnerships.

• In May 2025, RegCell (a Japan-based biotechnology company) partnered with GeneFab (a US- based CGT innovation and technology company) to support the expansion of RegCell’s regulatory T cell (Treg) therapy platform into the US; under the partnership, GeneFab will provide comprehensive manufacturing services.

Furthermore, the Israel–Iran conflict in June 2025 has amplified geopolitical instability in the Middle East, potentially disrupting the supply of critical reagents, enzymes and viral vectors sourced from or routed through the region, increasing transit risks and insurance premiums for CGT manufacturers.

Regulatory compliance, submission and audit

In May 2025, under Executive Order 14192, the USFDA and United States Department of Health and Human Services (USHHS) launched a 10-to-1 deregulation initiative requiring at least 10 existing regulations to be eliminated for every new one introduced.

• The policy aims to cut regulatory costs below zero, expand the scope to include guidance documents and memoranda and promote radical transparency through annual cost reports.

• For the pharmaceutical industry, this may ease compliance burdens and accelerate approval timelines, enabling faster access to the market for innovative drugs and devices.

Small molecule manufacturing  Chemicals and APIs

The global API market is forecast to expand from $255.0 billion in 2024 to $359.5 billion by 2030, reflecting a CAGR of 5.8%

Recent shifts in US trade policy have materially increased cost pressures for pharmaceutical manufacturers dependent on international supply chains:

• A 55% consolidated tariff on Chinese imports came into effect on 11 June 2025, replacing the temporary 30% rate applied in May 2025.

• Starting 9 April 2025, additional country-specific reciprocal tariffs were layered, including 27% on India, 24% on Japan and 20% on EU imports; these surcharges were suspended for 90 days and are set to resume on 9 July 2025, pending the outcome of trade talks.

Hurricane Erick, which made landfall on Mexico’s Pacific coast on 19 June 2025, poses significant risks to the region’s critical ports, such as Manzanillo and Lázaro Cárdenas, key entry points for API imports from Asia, potentially causing supply-chain delays and short-term disruptions.

APU / Drug discovery and clinical trials

Regulatory uncertainty in the US, driven by FDA staffing cuts and policy shifts, is prompting biotech firms to relocate early-stage trials to faster, more predictable markets such as Australia and Europe.

• Although relocation adds ~$1 million in filing fees and several million in trial costs, faster approvals and reduced regulatory delays help offset these expenses.

• Australia enables clinical trials to begin within 6–8 weeks with FDA-recognised data, while South Korea offers strong infrastructure, AI-driven recruitment and government support.

• Rising R&D costs are pushing procurement teams to prioritise regions offering efficient, cost-effective, and globally accepted early-phase research, mildly increasing trial execution costs.

Medical devices

Medical device components, such as casings, frames and structural elements, commonly use stainless steel and aluminium alloys.

• US tariff hike on steel and aluminium from 25% to 50% in June 2025 is expected to drive significant input cost inflation for metal-intensive medical device manufacturers.

• Aluminium price increase of 2.6% M-o-M in May 2025 is expected to put further cost pressure on high-grade alloy-based devices.

• In May 2025, HDPE price declined M-o-M by 1.1% in APAC, 2.3% in Europe and 5.1% in the US; this is expected to provide temporary cost relief for polymer-heavy disposable products.

In June 2025, the EU announced stricter regulatory scrutiny of Chinese medical devices, citing concerns over product quality, data security and uneven regulatory alignment under the Medical Device Regulation (MDR).

• The new EU measures, including enhanced inspections, certification reviews and possible import restrictions, are expected to raise medical device prices as suppliers face higher compliance costs and reduced access to low-cost Chinese imports.

Analytical laboratory and processing equipment

In May 2025, the PPI for Analytical Laboratory Instruments in the US rose 0.25% M-o-M due to tariff-driven cost pass-throughs.

• The PPI for Processing Equipment, including Pumps and Compressors, rose 0.6% M-o-M in May 2025, indicating persistent machinery inflation.

• Meanwhile, China’s factory-gate prices (PPI) fell 3.3% Y-o-Y, the steepest drop in 22 months, amid weak demand and aggressive discounting in capital goods.

Lab supplies and services

Lab supply and packaging costs are expected to rise due to the aggravating Israel-Iran conflict and increasing US trade tariffs

Plastic ware, glassware and reagents

As of 23 June 2025, oil prices surged to $80 per barrel – the highest level since January –after the US joined Israel in attacking Iran’s nuclear facilities; in response, Iran’s parliament has voted to close the Strait of Hormuz, a key global oil transit route.

• According to Goldman Sachs, Brent crude oil could reach $110 per barrel if global oil flows through the channel are impacted – which can potentially raise costs for plastics and reagent-based lab inputs.

• Compared to May 2025, polypropylene (PP) prices have declined 0.1% and polyethylene (PE) has shown a dip of 0.7%; the US HDPE prices dipped 5.1% M-o-M (compared to the month of April 2025), offering modest relief for rigid bioprocessing components.

Further, in May 2025, Section 301 tariff exemptions expired, reinstating duties on critical lab chemicals and components, with potential cost implications for laboratory operations.

Primary packaging

PVC/PET, glass and aluminium packaging

Blister packaging for pharma products typically involves raw materials, such as aluminium, PET and PVC, while HDPE is used for bulk drums.

• In June 2025, US tariffs on aluminium imports doubled from 25% to 50%, intensifying cost pressures on packaging operations, while UK-origin aluminium tariffs remains at 25%, with potential hikes after 9 July (depending on trade negotiations).

• The PVC suspension prices in the US decreased 7.3% M-o-M to reach $0.38/lb in May 2025, while the PET price in the US remained stable in May 2025 (as compared to April 2025) at $0.56/lb, while the prices in Europe declined 3.2% M-o-M to $1,239.7/ton in May 2025

Biologics and injectable drugs are typically packaged in glass or plastic vials/ampoules; the US PPI for flat glass increased 0.5% M-o-M in May 2025.

---

This category update is powered by The Smart Cube, a WNS Company. For more procurement intelligence, visit Amplifi PRO.