The Covid-19 pandemic in 2020 brought many industrial plants to a standstill. It is therefore not surprising that in 2021, companies have been working with double the effort to fill the gaps caused by the downtime.
The beginning of 2021 shocked everyone with an increase in prices for raw materials, energy, container transportation, and other materials, not only in Ukraine, but also throughout the world (Figure No. 1. Diagram of the correlation between the level of growth in industrial production prices).
The increase in the cost of container transportation by as much as 400% was impressive! Due to new outbreaks of coronavirus in southern China, cargo services were suspended due to staff reductions. Currently, there are major congestions in the ports of Yantian, Shekou and Nansha. As a result, 116 vessels were sent to other ports. It is predicted that the congestion will continue until the end of June.
Due to delays in deliveries from China, demand for European-made raw materials has increased. Suppliers, taking advantage of the situation, have significantly increased prices.
Our company is also experiencing a crisis, in just the last four months the prices of foundry materials have increased by 38%! The first price increase occurred in January 2021 by 20%, then in April 2021 by 18%.
Forecasts for the future will be disappointing: due to a sharp shortage of raw materials for the chemical industry, we expect the next price increase in July 2021, by another 20%.
Analysts predict that we will also see an increase in prices for some metals in the future (Table 1). The biggest jump is expected in 2021, after which prices will decline.
Steel production has always been relevant and is the basis of world progress. In recent years, we have observed a significant increase in steel production, and in the future, demand will increase. (Figure 2. Graph of steel production growth). The construction sector is the largest consumer of steel products, accounting for 50% of all production.
Recommendations on how to prepare for a crisis and reduce its consequences:
- Develop a series of measures to increase production productivity and increase the volume of finished products without reducing their quality.
- Warn partners about price increases for finished products, justifying the reasons for the price increase.
- Frankly discuss possible promotions and discounts with suppliers, by purchasing in larger quantities or signing a long-term specification.
- Develop ways to reduce the cost of production without changing the properties of the finished product.
- Create reserves of raw materials and supplies in warehouses, which will help to fix optimal prices and ensure uninterrupted supplies, while your competitors will offer products at much higher prices.
- Improve the qualifications of personnel, because efficient workers can increase production productivity several times over.
No company in the world is immune from a crisis. But its consequences can be mitigated by developing a long-term production development plan, taking into account all possible fluctuations and unforeseen situations.
Owner of Ukrfavorit LLC Olena Isayeva
