MOST nations, business institutions and private individuals in the world over have had to adjust their public expenditure, re-set or missed set goals or tightened up the family’s budget in response to the sudden but persisting global commodity price hikes in the world scenes.
This has caused a lot concern and headache to most business gurus, companies and nations as well.
"Seeing commodity prices go back to the stages they attained in 2008 is really a major cause for concern," Mr David Mureithi, Managing Director of Unilever Ghana, which now serves as head office of Unilever West Africa's productions ( excluding those of Nigeria) told the GRAPHIC BUSINESS in an interview on the current mounting commodty prices.
Prices of cocoa, a key source of raw material for most manufactyuring companies started pulling up way back in early October to close the year at well over $3,000.
The commodity currently sells at (today's price) and is promoising to continue hiking on the back of the political standoff in the Cote d'Iviore, the world's leading producer of the crop. The tension subsequetly led to the placing of a ban on export of the crop by Alhassan Outarran, a claimant to the Ivorian political seat causing the prices to escalate even further.
Crude oil prices are also escalating and are likely to continue having been fueled by the tensions in some of the major producing countries including the current unrest in Libya, a major producer and exporter.
For the past six months, palm oil (a key ingredient in soap and detergents manufacturing) also soared up by 60 per cent to currentlly sell at about $1,400 per tonne.
These hikes, higher than the historic 2008 price surges coming in the midst of economic, social and political unrest in key commodity exporting countries have raised fear among the business community that the situation may run deep into the year.
Refering to the 60 per cent stretch in palm oil prices within six months, Mr Mureithi said this meant a 60 per cent rise in cost of manufacturing for companies that depend heavily on the product for their manufacturing and other business related activities.
He said "palm oil is the key raw material in Unilever's productions, comprising of more than 50 per cent in most of our products. So, its 60 per cent price hike within the last six months meant virtually 30 per cent rise in our production cost just within six months."
That is not the only cost increase, Mr Mureithi noted adding that "a lot of the company’s packaging is done from petroleum diravatives and that goes to oil. All these are having a major impact on cost of production for companies and we at Unilever as well."
 |
| David Mureithi, MD, Unilever Ghana |
But not all companies the world over are at the receiving end of this commodity price pull ups. Raw material suppling companies are of course reaping in great fortunes from the situation and are perhaps hoping for a continuation of the surge.
In most cases, the heat generated by rising cost of production within companies is normally passed onto the final consumers of those products. The story is not different in this present instance.
Prices of most products in the country for instance have been mounting since the begining of the year resulting from these persisting commodity price hikes and other prodution cost related factors.
The on-shelf prices of Unilever products also went up "quite substantially", a situation the Unilever Ghana MD contended "was having an impact on the consumers' ability to buy more."
As demand for most key commodities in most of the emerging economies such as China, India, South Africa and the likes continue to increase coupled with low supply resulting from poor harvests, natural disaters among others, soaring prices of commodities can be assured to stretch well into mid year or even end of 2011.
And as that continues, raw material consuming companies would have to continue strategising; including possibly switching to substitutes to help avoid the overall wrath of these hikes.
But Mr Mureithi says "it is not that easy to switch to substitutes becasue they are readilly not available. And even in this instance, prices of palm oil (the company's key raw material) and its substitutes have all been soaring."
To him the present "global commodity surge is indeed a challenge, but not one that would draw the (Unilever's) business back."
Unilever Ghana Limited this year promised a six per cent growth leap in its 2011 growth after recording a 19 per cent growth rate in the previous year.
Mr Mureithi thus said the company was now aiming at consolidating those gains it achieved in the previous years.
No comments:
Post a Comment