Increase in Raw Materials Costs: Which Sectors Will Be Affected?

Salvadoran businessmen expect that at a local level the food, plastics and textile sectors will be the most affected by the increase in the prices of some raw materials and the prices of maritime freight.

Tuesday, April 20, 2021

This phenomenon has been announced for weeks. At the beginning of March, CentralAmericaData reported that due to the imbalance faced by world trade flows, shipping lines have changed their routes and prefer to move empty containers to Asia, a situation that generates shortages and causes increases in freight rates and raw material prices.

This situation is already being felt by businessmen in El Salvador. Jorge Arriaza, executive director of the Asociacion Salvadorena de Industriales (ASI), told Laprensagrafica.com that "... the price of commodities (raw materials used by the industry for production) is the main problem facing the reactivation of the sector and this inevitably means a rise in prices to the final consumer."

Arriaza added that "... 'we could not say that there will be an increase in inflation, but there is an increase in prices that may affect the local market to some extent'."
 
The trade association estimates that some raw materials and freight rates have risen up to 100% this year due to the reactivation of demand, especially in Asia, and that it will be the food, plastics and textile sectors that will suffer the strongest impact in the increase of their production costs in the coming months, the publication points out.

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More on this topic

Plastics Industry: Price Increase in Sight

February 2021

Due to shortages in raw materials and bottlenecks in the production of inputs demanded by the sector, businessmen in El Salvador expect that in the coming weeks the prices of plastic products will reflect increases.

In January it was already anticipated that since China reactivated its economy in mid-2020, the Asian giant has monopolized much of the raw material demanded by the industry, a situation that put upward pressure on costs and generated uncertainty among Central American businessmen.

Price Hike in Plastics in El Salvador

September 2014

Further increases in the prices of plastic products are projected due to the global shortage of monomer, the main raw material for manufacturing these products.

The global supply of raw material for plastic manufacturing has not kept pace with demand, leading to a shortage of materials such as ethylene monomer, "... whose price is around $1,500 per ton, comapared to previous years when it was between $600 and $800. "

Prices of Raw Materials Drop

October 2011

As a result of the the contagious effect of the financial crisis in Europe, along with slow U.S. recovery, commodity prices have reversed their upward trend and started to decline.

The IMF's report last September on expectations about the global economic situation indicated a slow recovery for the more advanced economies.

El Salvador: Textile Industry Worried by Increase in Price of Raw Materials

January 2011

The increase in the price of key raw materials and inputs for production can hardly be absorbed by companies.

Edwin Zamora, president of the Chamber of Industry and Textile (CAMTEX), added that they have no choice but to pass on the increases to costs.

"The union said that despite the rise in prices, El Salvador will not lose competitiveness against its biggest buyer: USA.

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