Rising input costs spell trouble for manufacturers

Industry stakeholders hint at inevitable price hike for consumers

LAHORE:

The local manufacturing industry is trying to absorb the impact of increase in the cost of raw material to protect consumers but it seems that the price hike is inevitable for many products.

Rubber, steel, copper and aluminium are the key inputs used by many industries manufacturing electrical appliances and their spare parts, auto and parts, and other industries specialising in producing machinery of various kinds.

With an increase of 27-68% in prices of raw material over a period of 13 months, the manufacturers all over the world are finding it hard to counter the blow right after the Covid-induced recession.

According to statistics provided by the stakeholders, the price of rubber, which is a key input for many industries including the tyre industry and those who use rubber parts, increased more than 50% in just one year from 160 Japanese yen per kg in February 2020 to 242 Japanese yen per kg on February 1, 2021.

It is still increasing as the price reached 270 yen per kg on March 12, an increase of 11.8% since February 1.

Similarly, the steel price increased in the period under review. It stood at 3,407 Chinese yuan per ton in February 2020 and went up to 4,184 yuan per ton by February 1, 2021, a significant increase of 23%. By March 12, the price reached 4,582 yuan per ton, up 9.5% in around six weeks.

Copper price was also on the rise, increasing from $2.5 per pound in February 2020 to $3.5 per pound by February 2021, registering an increase of 40%. The price further increased to $4.11 per pound by March 12, up 17.24% since February 1.

Moreover, the aluminium price increased 17.28% from $1,689 per ton to $1,981 per ton, which further went up to $2,155 per ton by March 12, an increase of 8.7% in just over six weeks.

The increase in the cost of raw material, following the Covid-triggered recession, is badly affecting the local manufacturing industries, especially the auto industry.

“This is not just a local phenomenon, it is an international impact. That’s why regional countries like India are contemplating a price hike of a few percentage points in their auto products,” said an auto manufacturer, adding that the hike in the cost of raw material was more than expected for the auto industries across the world.

It would seriously affect the abilities of automakers to meet consumer expectations during these tough times, he said, adding that it was a hard time for the local auto industry that had just started recovering from the effects of Covid-19.

Published in The Express Tribune, March 17^th, 2021.

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