What's Causing Raw Material Increase ?
Consumer Prices in U.S. Top Forecast, Stoking Inflation Concerns
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June 10, 2021, 5:31 AM PDT Updated on June 10, 2021, 10:02 AM PDT
The consumer price index climbed 0.6%, the second-largest advance in more than a decade. Though distorted by the pandemic, the CPI jumped 5% from a year ago, the largest annual gain since August 2008, according to Labor Department data Thursday. Read More
Key cause of why price continue to raise:
1. Currency devaluation:
The USD already exceeded the lowest trade value versus TWD or RMB is the past 5 years. Over 15% drop in the past 2 years. 2 diagram below reflect currency change .
www.exchangerates.org.uk/USD-TWD-exchange-rate-history.html
2. Nylon raw material Increase
The Nylon chip market during 2020 bottom out last year and there were reduction in manufacturing for both chips and yarn as the demands dropped for the overall textile industries. With the recovery in place, we are seeing shortages of raw materials across the board. Texas outage situation this past year slow down many raw chemical products for nylon especially. With excessive demand currently as the retailers are refilling their shelves and warehouse , that is placing heavier pressure on the supply chain which is driving the cost up. The demand currently is exceeding supplies across different markets.
https://ihsmarkit.com/research-analysis/is-it-time-for-the-asian-nylon-6-industry-to-rebound.html
3 Crude Oil price
Oil price is always a key indicator for price for synthetic materials and with every country around the world starting to import oil again including the US. The demand is again driving the price up toward $70.00 per barrel. This is signaling all raw material’s are subject to higher costing from raw material generated by oil based products for foreseeable future.
https://www.macrotrends.net/1369/crude-oil-price-history-chart'>Crude Oil Prices - 70 Year Historical Chart
Adding the 3x to 5x ocean freight increase since the beginning of the year. congested ports and high trucking / transportation cost, lack of warehouse and storage available. We have the perfect storm brewing in the current environment for inflation.
There is grace in everything . With Lumbar going up 200% and necessity such as sugar is up 20% just for the month of April. When we review the current price increases from 2020, the prices still remain lower than price at high point of 2019. So this is the grace compare to everything else that is jumping up faster and lot earlier. Again no one has a crystal ball but if the demand continues to raise and currency continue to fall . Price will be driven by demand and availability.
We will continue to bring you up to date trends and resources when available.