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Raw material prices continue to increase, affecting businesses

In the context of Russia-Ukraine conflict, the continued increase in raw material costs as well as the peaking of gasoline prices recently have caused difficulties for the business community. Input costs also "erode" the companies’ profits even though many of them have long-term orders.


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The increase in the prices of input materials for production makes it difficult for businesses

In the context of the ongoing production recovery, enterprises are struggling to cope with difficulties, maintain production momentum, and restructure operational processes to reduce costs.

Production recovers but raw material prices increases

Despite the influence from the Russia-Ukraine conflict and the impact of the Covid-19 pandemic, the production of industrial enterprises in the province continued to be restored. The main industries of processing and manufacturing saw a sharp increase in orders, leading to an increase in export value. However, the economy is still facing difficulties when commodity prices increase, gasoline prices, raw materials for consumption and production are still high. Specifically, in the wood processing and export industries, the price of raw materials and accessories for production increased; processing industry of animal and poultry feed, imported raw materials increased sharply; prices of iron and steel products are still high compared to the same period last year. Those make the related manufacturing industries operate in difficulty.

According to the Dong Nai Statistics Department, the consumer price index in the province in April 2022 compared to December 2021 increased by 3.15%. The average price index of 4 months in 2022 increased by 2.72% over the same period last year. Most of the commodity groups increased in price, only two groups of goods had a decrease in price index: post and telecommunications and education. The rest of the commodity groups increased, in which the transport group increased the most (up 18.35%) because the prices of domestic gasoline and oil products continued to rise. In addition, housing, electricity, water, fuel and construction materials increased by 3.17% due to the great demand for construction materials, especially with some large projects coming into operation.

 "Erosion" of profits

Mr. Pham Van Chinh, General Director of Global Packaging Joint Stock Company (Glopaco) said that raw materials to produce all kinds of packaging imported by enterprises have increased by 10% since the beginning of the year. In addition, there are other costs incurred. Although the sales growth of enterprises in 2021 is good and in 2022 there are many prospects when the number of packages supplied can increase by 20%, due to the price of input materials, transportation charges, the debt of customers, so the production situation also has certain difficulties. In particular, for paper packaging, the source of imported materials to distribution enterprises is also facing more difficulties due to the impact of the disruption of the global supply chain. Struggling to support, but businesses cannot increase product prices at a level enough to cover costs because customers are not easily accepted.

Also according to Mr. Chinh, in addition to packaging production, he also invests in the production and supply of silicates for the washing powder industry, but this year, this business segment is temporarily suffering a loss. "The price of raw materials in this industry increased abnormally, twice as much as normal, making the business plan not meet expectations," Mr. Chinh added.

According to private enterprise Tra Anh Tran - specializing in supplying teas to Dong Nai and neighboring markets, the price of input materials also increased. Mr. Tran Dang Anh, Director of the enterprise, said that the price of imported materials also depends on the production costs of farmers and farms. Meanwhile, fertilizer prices have continuously increased over time, causing raw material suppliers to increase their selling prices. This leads to businesses being forced to increase the selling price of finished products to the market. “In the difficult context, businesses find ways to adapt to stay, increasing prices is also an option, but it is very difficult. In the end, the ultimate loser is still the consumer in the current context of rising raw material prices," Anh added.

 Nam Vu
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