Word: rawing
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...these days. Earlier this summer, the company sent a quarter of its 2,700 employees packing, and employees fear another round of layoffs may be imminent. The reason, says Bambang Wicayo, the company's technical manager, is no mystery: skyrocketing oil prices have increased the cost of bringing in raw materials and delivering goods, while higher natural gas prices make it more expensive to fire the kilns that produce tiles. "If the price of gas continues to go up, we will not be able to compete," says Wicayo. "Things are only going to get worse...
...months because, in a highly competitive industry, they've been unable to raise prices to compensate for higher production costs?the price of polypropylene has soared from $800 per ton last year to $1,200 per ton today. "Consumers expect plastics to be cheap," says Jung, whose own raw-material costs have increased by 50% in the past year without him increasing prices. "Now I lose money on every plastic container I make. Maybe it's about time I retire...
Crude oil is the single most important raw material for the chemical industry. So when oil prices rise sharply?as they have over the past few months?chemical companies usually feel the pinch hardest. But when the big German chemical firm Degussa announced its earnings last month, the news was far from gloomy. Heinz-Joachim Wagner, Degussa's chief financial officer, calculated that the firm's raw-material costs had risen by more than a third over the past 18 months. Still, sales and earnings were up in the first half of this year and Wagner says he expects...
...least 4% this year. While that's down from last year's stellar 5% growth, it's more than double the euro zone's growth rate and is enabling companies such as Degussa and its German competitors to raise prices and offset more than j1 billion in extra raw-material costs. "High oil prices certainly still matter, but probably only half as much as they did 15 to 20 years ago," says Kenneth Rogoff, former chief economist at the International Monetary Fund (IMF), who now teaches at Harvard. He says that a $15 per bbl. increase in the price...
...greater the inflationary pressures will become. Rodrigo de Rato, the IMF's managing director, said last week that if high oil prices persist, "the impact on Asian growth will be considerable." Degussa's Wagner also warns that his forecast of continued profit growth depends on the stabilizing of raw-material prices. "There's tremendous uncertainty," says Deutsche Bank's Wall. For the moment, though, Europe's business executives, policymakers and central bankers are sitting tight, hoping their luck isn't about to change...