"last year's pork, last year's onions, this year's furniture is going crazy." the workers of a decorative company in hebei province lamented the journalist of the daily securities journal and now earn money early in the renovation。
In response, a number of construction-material home enterprises have recently issued notice of price increases. For example, the listed company theo homes inc. Issued a bulletin stating that, in the light of the recent tight electricity supply in the production areas and the continuing rise in raw materials and energy prices, its holding subsidiary, fossano novo, inc., while adopting efficiency reduction strategies such as scale manufacturing, profit production and centralized procurement, had decided to make reasonable adjustments in the prices of the main products and to increase the sales price of the tiles。
The chief ifcc analyst of cicas, in an interview with the journal of securities, stated that the underlying causes of the increase in the price of building materials included both the downstream transmission of higher prices of upstream raw materials and the supply and demand gap resulting from domestic energy consumption policies such as double-control, localized power restrictions and faulty production。
Price escalation, layer by layer
“last year, the custom closet was 180 yuan/m2 and the price has now risen to 298 yuan/m2.” the salesman of a home-wide tailoring company in the northern ring of beijing said to the daily issuer of the securities journal, “the price of raw materials from suppliers has increased, there has been increased uncontrollable pressure, and we are helpless and forced to follow up to ensure our own profits”
Ms. Lee, who sells wood doors in beijing's ten river building materials city, shares this. “but we can't go up much, for example, 30 dollars at the factory, and we'll go up by 20 dollars, but even if we squeeze our profits, it's too expensive for the client to hear the offer.” ms. Lee said that “the shop is virtually out of work and is in the engineering business of the renovation company”
“the price of steel has been rising since last year. During these two days, the most commonly sold steel fell by around $300 per ton, but remained above $5,000, almost 30 per cent higher than the same period last year.” the head of the shop at the main steel camp in a building in dingzhou, hebei province, told journalists that november and december had previously been a poor sales season, with a normal price of around $3,000 per ton。
A recently published letter of price adjustment issued by a decorative company in shanghai indicates that since may 2021, market factors have led to higher prices of raw domestic materials on more than three occasions, with no return signs, and rising labour costs, and that the prices of the finished product will be adjusted from 1 december 2021 as a result of the constant upward pressure on various types of domestic assembly materials。
“in the case of a block of 1. 5 m x 0. 75 m, the amount of 55 yuan/block is now 10 per cent per block; and the number of woodboards that make doors has also increased from 110 to almost 130 yuan/m2. This is what i learned in my chat the other day at the time of the settlement of the material, so that i have now finished most of it.” lüzer, who lives in ichun city, heilongjiang province, is a journalist for the daily securities journal。
Ms. Zhang, who lives in the tondai district of beijing, is not so “lucky.” “the broken aluminium doors and windows that i made when i renovated the first suite last april cost $20,000, and the same amount of material for the same area that was used to renovate the wedding house last september cost thousands more. If the wedding room was to be renovated as a whole according to the materials of the first suite, it would cost tens of thousands more now
Push down the business costs
In an interview with the daily securities journal, ipg chief economist bovenhee stated that the recent rise in the price of building materials had been driven by costs associated with higher prices of raw materials, and by the lack of supply caused by limited capacity due to power constraints due to lock-downs, the combined effect of which had contributed to higher prices of building materials. For upstream industries, demand may decline as a result of price increases, affecting the production and performance of upstream enterprises; for downstream industries, higher business costs and reduced profit margins. The rise in the price of building materials can be transmitted to upstream and downstream enterprises in different ranges and ways, thus affecting the marketing and performance of relevant listed companies throughout the chain。
“the overall increase in revenue from the consumption of building materials since this year has been driven by cost pressures due to higher upstream oil prices, production restrictions in sectors such as cement glass and associated price increases, as well as weak demand due to lower downstream property performance and exposure to credit risk for real estate enterprises, with profits being more clearly suppressed.” it was indicated that, in the context of overall industry pressure, the lead company had shown greater resilience and pricing power and that the concentration of the industry would increase further。
It appears that higher prices for building materials will put a cost pressure on downstream smes, and that their own firms are under pressure to increase prices for upstream raw materials, leaving the industry as a whole under stress. Against the backdrop of weak end-demand, smes are faced with a lack of adequate policy responses to rising cost and need support at the policy level: on the one hand, tax cuts and reductions targeted at smes; on the other hand, incentives for financial institutions to increase financial support to smes in the middle and downstream sectors, including by increasing credit lending support, reducing the cost of credit financing and, finally, by improving supply and demand linkages, leading upstream prices to normal levels。
“for smes themselves, efforts should be made to increase their own efficiency, reduce their costs and find alternative products, adjust their product structures and business structures to cope with higher building materials prices, in addition to efforts to channel and transfer pressure from higher building materials prices. There is a policy need to strengthen industry regulation to prevent forced transactions and market distortions, which can temporarily ease the pressure on smes through interest rates, subsidies, government procurement, etc.”berwinh said。
Looking ahead to subsequent trends in the price of building materials, experts have different views. It is expected that the increase in the price of building materials may take some time to achieve relative stability once the market is rebalanced。
It is believed that cement enters the wrong production phase in the winter and the demand ends into a dry season, that costs decline with coal prices, which are expected to continue to fall. Demand for glass has not yet peaked, while supply-side policies remain restrictive, supply-demand linkages are likely to remain tight and prices are unlikely to decline rapidly. With regard to consumer building materials, prices for raw materials, such as coal, pvc and other raw materials, have fallen significantly as policy shifts and price guidance have been put in place, and the property cycle has been set downwards, consumer building materials are facing a decline in demand, supply has recovered, costs have returned to normal areas, and corresponding consumer building materials prices are expected to fall。
(editor, superior monroe)
