A critical update on how shifting global market conditions are affecting us.
Raw material costs hit record high, resulting in sharp price increases
Raw materials costs and shortages
As a manufacturer of end products, Elmich is positioned at the end of a long supply chain. Critical changes to those situated high up, beginning right from the raw materials stage, have a ripple effect that gets passed on down to affect stakeholders further along the supply chain.
Global market events and disruptions have forced the prices of raw materials such as plastic and steel to be at record high levels. These significantly higher costs as well as other resulting effects are then passed on downwards.
- Covid-19 brought about a surge in demand for plastic products such as healthcare and medical equipment and food packaging, increasing the demand for their main factor of production: plastic.
- The supply of plastic, however, is at a shortage recently as a result of numerous force majeure declarations by the US and European plastic producers, where they no longer have to meet production commitments due to uncontrollable circumstances.
As the US and Europe are some of the largest plastic producing countries, this has led to drastically elevated prices of plastic and low output levels by plastic product manufacturers globally.
Freight costs and delays
The pandemic has also led to a global container shortage, resulting in increased freight costs and delays. Besides directly impacting the costs of our logistics operations, this crisis also increases the costs at various stages of the supply chain which are compounded and passed on further.