Raw Material Prices More Volatile Than Crypto

in LeoFinancelast month


Just in the last two weeks raw material pricing on plastic has increased and dropped over 25% and is back up again today after it had dropped yesterday.

Everything just seems crazy right now as I am being pulled in every direction and something always has to give at some point. During the lock down year which it was more or less for me time was never a factor and now I don't have enough of it.

Tonight I have been after falling asleep which I never do, been calculating costings as the prices are yoyoing virtually every day due to an unstable price of raw materials. This must be similar to what traders experience in Zimbabwe and the likes as every day is different and you need to keep adjusting prices.

In order to stay competitive I have to revisit the price list at least 3 times per week as raw materials are changing whether up or down by 25% every week. If you get it wrong you are not competitive or you are losing money so it is a must do right now. This is not comforting for someone who calculates the cost and profit margins whilst sitting opposite clients as it is now impossible for me to do. I phone my business partner at least 4 times a day checking the latest forecast and if we are still current on our pricing. Every batch we buy is costed out and normally sold within a few days as there is never enough to just stockpile plus what happens if the price suddenly drops?

A friend of mine is in the manufacturing business where they use steel and they have exactly the same problems I am now encountering. I am one who hates uncertainty and not knowing from one day to the next I find a little unnerving. The day should be spent dealing with and finding new clients yet it is predominantly finding out the latest raw material prices to get a jump on the competition. Today we purchased 100 Tons which may sound like a lot but will be finished by the weekend and have the risk of someone buying a cheaper batch tomorrow. I would rather have stock than no stock though and this is where having a loyal clientele and an open book policy does count.

I know of no other suppliers who reduce the prices if they find cheaper material ad something I firmly believe goes along way in building trust. This is tricky as trust goes both ways and why I have stopped chasing business like I used to. The lockdown has highlighted the good and bad businesses out there and it only takes one bad deal or a company to collapse and close down to swallow all your profits for the entire year. This has always been the case but there are just so many right now that are borderline and are not financially strong.

This week I am getting calls from companies that I phoned earlier in the year and never got back to me. The word savings is at the top of their requirements and what I specialise in and openly admit I will find them if they let me in. Many don't realise the savings are right in front of you and they always look at everything else and not the obvious.

I can't believe I am saying this but I am looking forward to the weekend as I am missing Hive and trading on Binance as my time is now seriously limited. This body is not used to getting up at 6am and is still set to going to bed at 2am so changes have to happen or I fall asleep like I did tonight which I just can't afford to do.

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Are there any futures or other derivatives you can use to lock in your raw materials prices?

You just can't get it as there is a world wide shortage. The American imports dried up 2 weeks ago.

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We have a building timber shortage here (Australia), because of bushfires 18 months ago, but haven't heard of a plastics shortage here, but I have a feeling we don't make too many plastic things here, apart from maybe pipes for plumbing. I could be wrong..

I think lumber is going through something similar as well. With the housing market booming over here there is just no solid price on the stuff. I think really the only thing you can count on is that it will continue to go up. It's hard to pass that along to your customers though when everything is so uncertain!

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