WORLDWIDE PRICES ARE SKYROCKETING. THE IMPACT ON ASEAN
Many things had changed since Covid-19 pandemic struck the world last year, most of the Countries have been somehow affected, most of the economies saw a sharp fall of GDP and, on the other hands, an increasing number of deaths. Few Countries are able to say that they have contained the pandemic and minimized the damages such as ASEAN Countries, that overall had performed well (see here following one of our posts, dated on March 2021: CLICK HERE).
We all know that the 2020 was dominated by lockdowns and strict measures to contain the virus, in general we have seen a decrease of the demand of goods which led consequently in the second quarter of last year to a drastic decrease of oil price. This had benefited numerous of operators, especially the oil-related industries such as oil companies, chemical, plastic-related manufactures etc. But this “quiet after the storm” di not last for long.
2021: SUPPLY CHAIN DISRUPTION AND PRICE INCREASES
Starting from this January 2021 the container imbalance (too many boxes in the West and a shortage in the East) had caused a sharp increase of the transport costs especially for those Asian Companies exporting their product to EU and USA, see our older post HERE; at the same time the other way around (containers form EU and USA to Asia) did not see an increase so high, nevertheless the overall transport increase was about 50%-70% (as per direct experience of the one who is writing this post..).
Probably the higher transport costs and, consequently, the shortage of the raw materials led to an unexpected sharp rise of prices in most of the goods and commodities, this trend started early this year and is continuing until now with no sight of stabilization. We believe that this is affecting especially those Companies that are working “on demand” and with “lean manufacturing” because due to the fact that their warehouse is quite “empty” all over the year (obviously because of the main concept of LEAN manufacturing itself), their supply chain is pretty much affected.
THE FOOD INDUSTRY AND THE STEEL SUPPLY
The pandemic also had a mismatching in inflation rate of food industry compared to different areas of the world. In fact, due to the different stages in which the economic areas have been affected (Covid-19 struck Asia slightly earlier than EU and USA), in the past 2020 the food industry was hit much more in Asia rather than in the West that was affected in late March/April 2020, there is an interesting article from ILOSTAT HERE.
At the same time, the steel supply chain did not benefit from the pandemic, in a quick and exhaustive clip from the YouTube channel THE METAL ROOFING CHANNEL there is an interesting interview where we can clearly understand that the industry of raw steel had faced an increase up to 75% compared to last August 2020.
On the other hand, from our side, the writers of this article have direct evidence in Thailand market where, just recently, speaking with one of the largest manufacturers of composite metal roofs in Bangkok, we were told that the local suppliers of steel (which is, as you can guess, one of the main components of their products) had increased their process up t 40% compared to last year and compared to the pre-pandemic price.
THE FUTURE TREND: WHAT TO EXPECT?
Still the B2B operators are in shock due to this sharp rise of inflation but what will impact the market the most, will be when the operators will inevitably transfer the additional cost to the final Clients and, according to the examples that we have done earlier, we will see more expensive roofs and more expensive meals. Do not get us wrong, most of the sectors are affected not only food and steel, so most likely also the smartphone will cost more along with the books, clothes, fuel, cars, houses and the list goes on.
No one has the crystal ball and no one know what we are up to. Today the prices are going up, tomorrow maybe they will go low, today we have this price but tomorrow we do not know.
Probably the best option for any operators is try not to get caught in “fixed business propositions” that means that whenever we are proposing products/services with the current up-to-date prices we shall consider the volatility of the price itself and protect ourselves from unexpected increase that might cause a loss of profit if the Client does not accept the latest price at the moment of the purchase.
As per our direct experience we try to follow this advice whenever it is possible, the propositions to Clients might be not so much accurate as they were in the past but at least we manage to secure our position in a “safety zone”.
Bangkok 4 April 2021