Raw materials’ price increase is a temporary phenomenon

As an entrepreneur with more than two decades of experience in cable-making, I have never seen market conditions nowadays. The prices of many raw materials are hiking with every passing day, and it seems inevitable to pass some of the increased costs for products to the end-users.

The covid-19 pandemic has affected countries and individuals in vastly different ways. Like other crises, it will leave lasting consequences. It has changed many aspects of international trade, with consumers being forced to change behaviour, companies transforming business models, and governments adjusting regulations.

The current acceleration of worldwide vaccination, sadly an uneven process with developed countries advancing well ahead of the others, suggests that the immediate goal of resuming economic activity seems to be within reach. The global economy is poised for a solid rebound this year as vaccines, and expansionary policies help repair damage from a pandemic that destroyed more than a quarter of a billion jobs.

With the global economy reopening, associated with the high demand for raw materials, their price increases and manufacturers face numerous challenges through the supply chains. As it is rightly pointed out in the Esharelife publication, four significant trends are affecting raw material prices:

  • Strong global market demand, significantly China’s V shape economic recovery, has led to shortages of many raw materials
  • The oil price has risen by 58% since November 2020
  • The global shortage of shipping containers has led to a sharp rise in transport costs from Asia to Europe thus further restricting Europe supplies.
  • Additional non-tariff costs related to the new UK customs arrangements with the EU add to the cost of imported raw materials into the UK from Europe.

I couldn’t agree more with the experts’ views mentioned in the above publication that the price increase of raw materials will be a temporary phenomenon. With the expected stabilisation of market conditions in the second half of the year, companies worldwide will do business as usual and contribute to the expected global economic growth projected by the United Nations Conference on Trade and Development at 4.7%.

However, in the short term, we must accept that price increment and live with it.

One thing is important to bear in mind. While we shouldn’t spare any efforts to revitalise our economies, we must align our business goals with the 17 UN Global Goals and achieve a green recovery. Sustainability is at the core of Tratos business, and I will never stop pushing towards achieving it.

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