Range of factors alter material price outlook
luxembourg Flint Group has revised its material forecasts for 2017 in view of a series of developments at the start of the year that suggest a steeper uptrend than it projected in December. Jan Paul van der Velde, senior vice-president for procurement, IT, and regulatory, said the outlook had shifted from “relatively small upward cost pressures” to “a completely different picture”.
“Since the Opec + 11 restriction on output of crude had a notable impact, we have seen many other raw material costs increase, even if not related directly to crude oil,” he said.
Key drivers of raw material price rises include pricier crude, hikes during 2016 in the costs of chemical building blocks, anti-pollution measures in China, major incidents such as the fire at the Huntsman TiO2 factory, currency and trade challenges, and higher costs for sea freight.
Flint’s update to its January forecast starts with the statement, “The world is not becoming easier”. “Over the last few years the geo-political situation has started to change, including shifting from attempts to reduce trade barriers to some countries talking about increasing trade barriers,” said Van der Velde.
“The recent political changes in the US and UK are also causing further uncertainty. Uncertainty is not good for cost developments. Currencies have been extremely volatile, makingit hard to make longer-term sourcing decisions as manufacturers continually change the regions they will sell to, resulting in demand – supply challenges on some (base) materials around the world.
“Next to the significantly higher average crude price versus 2016, we also see that the major building blocks in the chemical industry, the so called BTX complex and Styrene, have gone up. Further, the number of Force Majeure notices seem to have risen significantly, leaving some major areas in supply/demand shortages. All of these issues have caused double-digit cost increases that have produced higher prices downstream.
“In addition, the stronger enforcement of the existing environmental rules in China, specifically relative to air pollution, have resulted in production limitations or even full shutdowns of various industrial parks. This has caused major supply shortages for base raw materials required to make ink raw materials.”
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Flint’s Van der Velde: ‘Uncertainty is not good for cost developments