Increases in the prices of raw materials and impact on the markets
Global value chains are at a critical juncture, sandwiched between growing international demand following the post-pandemic economic recovery, on the one hand, and a combination of supply shortages and transport bottlenecks, on the one hand. other. These two factors that are causing increases in the prices of raw materials, unimaginable until a few months ago. In this regard, we would like to bring you some data and some reflections, which we have, in turn, collected from popular sites.
What are the causes of increases in the prices of raw materials?
According to authoritative experts in the field, the cause is the strong imbalance between supply and demand; this gap is constantly growing, which cannot be bridged. The most recent estimates have marked an increase in the prices of some materials in the order of 200% only in the last year and thanks to the collapse in prices that had characterized the first months of the Covid-19 pandemic, made the increase so substantial . A striking example, which closely involves our production, is made up of steel, which went from $ 380 per ton in June 2020 to $ 1,100 per ton in September 2021: a dizzying increase that reaches almost 300%. As for oil, the cost of which had collapsed in 2020 (-68%) and has since then risen sharply (+ 203%), it is possible that its price could settle at 60-75 dollars a barrel. However, all materials have had a similar story, but the negative primacy of the increases goes to copper, iron, steel, corn, coffee, wheat and soy, timber, semiconductors, plastics, cardboard for packaging, rare earths, lithium. To translate the situation into numbers, the purchase of raw materials accounts for 46.6% of the turnover of manufacturing companies and 33.1% for construction companies. To these dynamics was added towards the end of last summer (but in a process that had already been developing for some months) also a surge in energy prices, consequent to an increase in demand for hydrocarbons (natural gas in particular ) and, also in this case, the lack of supply. In fact, natural gas went from $ 1.22 per MMBtu (British Thermal Unit, a unit of measurement that is used to quantify natural gas and whose unit corresponds to approximately 28 m3) in May 2020 to $ 25.81 in September 2021. Certainly these two peaks cannot be considered as immovable reference values given the frequency of price changes, but the difference gives an idea of what is happening in the global energy market. The transition will lead to an increase in the costs of fossil energy sources and these are the first consequences. Within the EU, the increase in prices is also partly linked to the implementation of some of the EU’s climate policies. The increase in the cost of energy is compounded by the increases in gas and diesel, thus compromising the expected post-pandemic recovery. Meanwhile, the governments of many countries will have to manage rising inflation. Indeed, the US Fed and the ECB in Europe are already taking steps to prevent uncontrolled increases in inflation. The strong push on costs, unsustainable in some sectors, is reducing company margins and causing a rise in producer prices which in November 2021, net of energy, rose by 8.9%, a rate of change never recorded since 2001.
As we said in the beginning, we transmit this information to you for disclosure purposes, as we have received and collected it. In turn, we suffer from this situation, which inevitably affects our prices. Nonetheless, we have kept our increases as low as possible and have absorbed these general increases in a very high percentage.
