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Anticipating material price increases, businesses trying to stock up
A lot of businesses are planning to hoard input materials for production as they have seen demand in the market rising.
Trying to collect materials
Businesses have begun collecting input materials as they believe the national economy’s recovery will lead to increased demand. Moreover, they remember last year’s material price fever attacks and fear the prices of chemicals, plastic materials and ingot steel will skyrocket periodically like they did in May 2008.
“Material prices have been rising gradually. PVC powder has increased from 13,000 dong per kilogramme to 15,600 dong. Directly proportional to the crude oil price increases, it is expected that the prices of chemicals and input materials for production will increase further,” said Nguyen Dinh Kim, the owner of Asia Footwear Company.
According to the Vietnam Steel Association (VSA), in the first half of April, Vietnam imported 41,000 tonnes of ingot steel and 225,000 tonnes of finished products of different kinds.
Nguyen Tien Nghi, Deputy Chairman of VSA, said that imports in April saw a sharp increase in comparison with January and February. It was because the steel domestic price stayed firmly at $600/tonne, while the import price of ASEAN-sourced products was just $480/tonne. Steel producers, though subject to import tax, still were able to sell imported steel $50/tonne cheaper than domestic products.
According to Nguyen Ngoc Anh, General Director of SMC Trade and Investment Company, a steel distributor in the domestic market, the steel price has decreased to the deepest low. Meanwhile, the steel price is expected to increase gradually in the last months of the year on the forecast about the possible early recovery of the world’s economy, which would stimulate demand.
In April, the volume of steel sold was 429,000 tonnes, an increase of 20 percent over the previous month. “Because of the sharp demand increase, steel producers made six price increases in the month,” Anh said.
Businesses well understand that crude oil prices will not return to the over $100/barrel level, while the prices of chemicals and plastic materials are not likely to increase by two- or three-fold as they did in May 2008. However, forecasts by experts on international websites and released by foreign groups saying that prices may increase by up to 30% have prompted big businessmen with profuse capital to import materials directly from foreign sources.
Owner of My Hao Cosmetics Company Luong Van Vinh said that companies have begun collecting materials because they believe it is now the right time to stock up.
Material prices are on the increase, but they are just equal to the price levels in 2006. Meanwhile, commodity retail prices have increased by 30 to 35 percent in comparison with the retail prices of 2006.
Businesses have been trying to store materials for production in anticipation of the world’s material price increases. Moreover, they believe that even if material prices decrease, they will not incur losses. Material price decreases would not be big. Meanwhile the dollar price is on the increase, which makes import prices higher.
And trying to avoid losses
While producers in other industries are trying to import materials, animal feed producers dare not import materials at this moment.
The director of an material import company said that he dares not import materials now as prices have been increasing and domestic farmers still hesitate to make investment in production.
According to the Vietnam Animal Feed Association, in the first four months of the year, imports saw a sharp decrease and it is expected that the situation will last until June or July.
The low imports and short supply of domestic feed materials both have pushed prices up. The price of mixed feed has risen by 15 percent to VND7,000/kg.
A representative of the Vietnam Textile and Apparel Association (Vitas) said that its member companies only import enough materials for production because the companies are facing a lack of orders.
Chairman of Vitas Le Quoc An said that garment companies only import materials at moderate level, partially because they are still waiting for orders, and also because they still don’t have money.
VietNamNet, VnMedia
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