Spiralling raw material costs

Spiralling raw material costs

Spiralling raw material costs

Barricades at refineries and go-slow convoys on Europe's motorways have all reflected both the individual's and the transport industry's concern at the rising costs of hydrocarbons. While the dissatisfaction with fuel prices has rankled with people, the underlying effects of oil prices have had a much greater impact on industry than simply the costs of distribution. It can now be seen that the effects on raw material prices, and particularly resins, has been devastatingly high as the knock-on effects of higher transport and energy costs have fed through.

The European Resin Manufacturers Association (ERMA) has recently commented upon these increased costs and point out that they add to the unseen, but all too real, costs of complying with legislation. Whilst the Association accepts the requirements needed in the case of health and safety of both the general public and industry workers – as does this journal – it states that costs "are being increased further by a wave of EC Directives and other initiatives". It adds that many of these are not uniformly applied, while some are based on esoteric and questionable foundations. Typical of these are the "Climate Change Levy" resulting from the IPPC initiative and the proposed Decopaint Directive, which threaten large numbers of SMEs with consequent loss of jobs and reductions in the competitive supply chain. "Equally bad is the inhibiting effect of starting block directives enshrined in ELNECS and ELINCS documents, whose bureaucratic interpretation stifles innovation."

Back to the effects of higher transport and energy costs, the ERMA report says that stock management strategies in recent years, such as "just in time", have come perilously close to break-down, with the frailties of minimum stock holding being exposed when distribution is disrupted by outside events. The rise in oil prices has also meant that, by the third quarter of the millennium year, double digit price hikes on some monomers and solvents, ranging up to 50 per cent, became almost incidental as others soared, doubling and, in some cases, trebling in price. Indicators suggest that these levels will be sustained in this new year. As resin users already know, these price increases have had to be passed on.

Further information from Jim Hemmings, European Resin Manufacturers Association, 8 Waldegrave Road, Teddington, Middlesex TW11 8LD. Tel: 020 8977 8292; Fax: 020 8943 4705.

John Bean