As we have already mentioned, the Chinese Government since the end of last year began to take precautions to reduce the high levels of pollution generated by Chinese factories. The Chinese factories that pollute are the plating and cardboard factories, so raw material prices have risen. How is this happening in China?
From IBMH we have seen how the new application legislated by the Chinese Government regarding the controls in factories is much more strict. These new rigorous controls have meant that many Chinese factories and suppliers have been unable to meet their estimated production dates, causing long delays and dissatisfied customers.
Therefore, we must be aware that if our import needs revolve around these raw materials, we will suffer:
– New production capacity limitations in cardboard and plating factories.
– Prices continue to rise due to high demand.
This type of news has a special impact on both the commercial margins and the Official Tariffs, so from IBMH we are aware that we must know perfectly how the raw material affects our imports. When commodity prices raises, the first thing to know is how this can affect our purchase prices.
For example, it is not the same to import furniture hardware (in which the raw material is very important in setting the price) than finished furniture (in which an increase of this type of raw materials will have a smaller incidence).
On the other hand, it is important to check the information provided by the manufacturer on the percentage increases. To do this, see pages like steelhome.cn, to see the historical evolution of any material. Other variables to take into account are fluctuations in exchange rates or oil prices, which will also directly affect purchase prices. In order for the impact of the increase in these prices not to be so marked, we try to review the manufacturing batches during the increase phases and negotiate the order quantities to lessen the impact of these increases, as well as to analyze with the manufacturer the possibility to pay our operations with another currency, for example the RMB.
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