Raw material prices: a surging trend which shocks the economy

Once again we are facing a current issue: how the pandemic has been influencing the economy and in particular our industry.
We have already focused on the trends of raw materials with the analysis provided by “Scenari e Tendenze” therefore we cannot help talking about the situation in our market and industry. All the Italian factories, aiming at the same goal, are working on restarting with a certain degree of resilience but the surge in the prices of raw material is hindering their recovery.
No industry can be excluded: plastic, wood, metals, scrap and iron and steel. Factories, mostly small and medium sized, are facing record prices due to an actual shortage of raw materials. What are the consequences? Entrepreneurs are facing delays in supplies and they need to choose whether to increase their costs or turn down new orders.

In order to better understand the reasons behind this scenario we need to step back and go back to the beginning of 2020.

Shortage of raw materials and skyrocketing quotations: causes?

The market dynamics we are going through come from a sequence of events. First of all, the lockdown of the first wave of pandemic closed all the production activities during the peak of the sanitary emergency. A standstill which has limited raw material stocks then creatin a global crisis.
China came out of this situation already in April 2020 while other nations have been still. Thanks to favourable low quotations of raw material, Chinese factories have been collecting massive supplies of raw materials. After the restart of other countries, the demand of raw material has been rising but it cannot be fulfilled due to the shortage of offer. Moreover, the port movement delays have further negatively affected this situation. A dynamic which has been delaying delivery times due to the Coronavirus and which has led to an increase in the transportation costs.

This situation, combined with an overall uncertainty, has significantly impacted on the recovery economic speed especially in Italy and Europe. Companies, in order to restart their production, have been forced to buy raw materials despite the constantly increasing prices.

A decrease in prices will be possible only in the light of normal transport conditions and production of the main commodities, this making possible a relaxation for companies.