When Input Costs Rise, The Batch Cost Gap Gets Expensive

In April 2026, PPG announced a global price increase of up to 20% across its coatings portfolio. The reason cited: a rapidly deteriorating global cost environment, particularly in petrochemical raw materials, energy, and transport.

PPG was not alone. Titanium dioxide, which makes up 20-30% of most paint formulations, saw three rounds of price increases in the first quarter of 2026 alone. $100 per ton in February. Another $100 in March. $150 more in April. That is $350 per ton in a single quarter.

Acetone, a common solvent in coatings, surged 123% in Asian markets. Epoxy resins climbed 60%. And the tariffs on imports from Canada, Mexico, and China, the three countries that together supply more than $2 billion worth of coatings raw materials to the U.S. market annually, are not going away. 

Every coatings manufacturer in North America is watching this. Most are asking some version of the same question: how do we respond? Most are focused on the right things. Supplier diversification. Customer price increases. Alternative sourcing strategies. These are the correct moves. But there is a prior question most manufacturers have not answered, and it is the one that determines whether any of those strategies actually hold margin. Do you know what your operations actually cost, per batch, right now?

The price increase you can see versus the one you cannot

When a raw material price goes up 20%, there is an obvious response: adjust the formula cost, reprice the affected SKUs, and communicate the increase to customers. Most manufacturers can do this.

The harder problem is the cost that never gets counted.

If a coatings operation runs at 6% production loss and the industry benchmark for disciplined planning is closer to 2.5 to 3%, that 3 to 3.5 point gap is not a new problem. It existed before tariffs. But it cost significantly less per batch when TiO2 was $350 per ton cheaper.

When your inputs get more expensive, every unit of waste gets more expensive with them. A 1% scrap rate is not 1% of material. It is material, labor, and machine time that earns nothing, plus the batch you could have produced with those same inputs. At old raw material prices, that gap was uncomfortable. At today’s prices, it is a line item.

The manufacturers who will hold margin through this cost environment are not just the ones who negotiate best with suppliers. They are the ones who know, in detail, what each batch actually consumes, how that compares to what it should consume, and where the gap lives.

Three places the hidden cost is compounding

Your formula may not reflect your actual inputs

If your bill of materials was last updated before the supplier swap you made eight months ago, your cost model is built on a fiction. The new material costs more. Your system does not know that. Your pricing does not reflect it.

This is not an unusual situation. In process manufacturing, formulas change constantly. Regulatory pressure forces substitutions. Supply disruptions force reformulations. Temperature variation drives daily adjustments that never make it back into the system. Over time, the formula in the ERP and the batch sheet on the floor quietly diverge.

When they diverge, every cost that flows from that formula is wrong. Not approximately wrong. Wrong from the base up.

The question to ask is simple: does the formula in your system match what your floor is actually using today? If the answer requires a conversation, or a spreadsheet, or an educated guess, the recipe is where the problem starts.

You may be losing more per batch than you think

Operations managed by hand average 5 to 8% production loss. Disciplined, system-supported planning runs closer to 2.5 to 3%. The inputs are the same. The outputs are very different.

That difference matters at all raw material price points. At current price levels, it matters more than it ever has. A 5% loss on a batch that uses 100 pounds of an additive that has increased $150 per ton is a very different number than it was 18 months ago.

The standard that most operations are measuring against is expected loss. But many manufacturers do not have that number built into their formula at all. They cost as if every ounce of raw material becomes finished product and then absorb the variance quietly into overhead at month end. The variance has always been there. The cost of carrying it has grown.

You are finding out what the job cost after you can do nothing about it

If your production data shows up at month end, your window to respond to what you are seeing is already closed. The batch ran. The material is gone. The order shipped. Whatever happened on the floor happened without visibility.

The timing problem is what makes the formula and yield problems nearly impossible to close. If you could see a batch running over budget mid-production, you would investigate. If you could see a particular product consistently posting higher-than-expected loss, you would trace it. If the data arrives 30 days after the fact, you are not managing your costs. You are reviewing them.

What separates manufacturers who hold margin from those who absorb losses

The coatings manufacturers who come through this cost environment with healthy margins will not all have found better suppliers or passed more costs to customers. Some will have simply started knowing more.

They will know what their formula actually says versus what the floor is actually using. They will know their expected loss per product and measure every batch against it. They will see job performance in real time, not just when the books close.

That kind of visibility does not require a five-year ERP implementation. It starts with an honest audit of what you actually know today.

Four questions worth answering before anything else:

1. Does the formula in your system match the batch sheet your floor actually uses right now?
2. What is your expected yield on your top ten products, and are you measuring actual yield against that number on every batch?
3. If a batch runs over your expected material consumption today, when do you find out?
4. Can you name your waste number by product, by month, without running a manual report?

Those four answers will tell you where you stand. In a market where inputs cost this much more, what you do not know is no longer a background inefficiency. It is a direct cost.

We covered this in detail

Earlier this year, we ran a session called Formula to Floor: Why Coatings Manufacturers Can’t See What Their Operations Actually Cost. Ralph Kubek, who has spent more than two decades inside process manufacturing, and I walked through the specific places cost breaks down in a coatings operation, the framework we use with clients to diagnose it, and the operational changes that make the biggest difference.

The session was built around one question that most coatings manufacturers cannot answer confidently: do you actually know what your operations cost?

If you want a practical framework for getting there, the recording is about an hour.

[Watch the Formula to Floor on-demand session]