Necessary conditions to cause a dust explosion
In the last article, we talked about the effects caused by covid-19 on the macro level. Let’s talk about the effects on micro level.
The effects is on the following aspects:
1. The price of raw material rises sharply.
In 2021, the raw materials rise a lot, especially in the second half year. Take November as example and according to the statistics, almost all of the raw materials rise. The price of magnasium, metal silicone, polycrystalline silicon, ammonium sulfate, phosphoric acid, tin, lithium carbonate and acetic acid rise more than 100%, especially the lithium carbonate rises 371.64%.
OrientFlex as a hose supplier still affected by the raw material price rising. The butadiene rubber, natural rubber and butadiene styrene rubber respectively rise 45.13%, 2.29% and 16.88% on year-on-year basis.
For the plastic material, the PVC, HDPE, LLDPE and LDPE respectively rise 17.12%, 2.68%, 10.77% and 16.78% on year-on-year basis. Other hose materials rise in different ranges.
The rising of raw materials deeply hurt foreign trade company including OrientFlex.
There are two reasons why the raw materials rise so much. First is that the undersupply. Because of the covid-19, most of the factories can’t run normally, so the production of raw materials is very low. As we all know, raw materials mostly come from developing countries which has limited technology and ability to come over the disease. So it cause the undersupply in a long term.
The other reason is that the soaring demand. In the second half year of 2021, the covid-19 has been controlled to a certain extent because of the vaccine and the effort of all of the human. People’s life and production in the factories are back to track. After being closed for a long time, factories recover from covid-19 and the production soars, especially in the developing countries.
These two reasons cause the demand exceeds supply, so the raw materials rise sharply.
2. Freight has multiplied
Since the second half of 2021, a large quantity of ships crowded at the ports of America, and because of the covid-19 and the aging of the ports, the crowd question can’t be solved. Worse more, the purchase season is coming, so there will be more and more ships crowd. These cause the sea freight rises suddenly and sharply. A container rises 3000 USD or even doubled. That may cause a hard question that the freight is higher than the goods itself, which is an impact for the foreign trade industries, especially the companies like OrientFlex.
3. Pressure of capital
Because of the covid-19, the staff have to work at home. It has limited effect on work but it will increase the pressure of companies. Because staff all work at home, but the office rent shall be paid as normal. This will cause a shortage of cash and even cause the capital chain broken.
In another hand, when buy materials, the sellers ask for a 100% advanced charge. The prices of raw materials are super high, with a 100% advanced charge, there will be huge pressure on capital.
How should the foreign trade companies do in such hard conditions? Please see the next article.
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