Industry vs Trading and Current Challenges

What is the basic difference between industry and trading?

There is a fundamental difference between industry and trading. In an industry, raw materials are transformed in shape and nature to create a new product, whereas in trading, the responsibility is only to deliver the finished product to the end consumer.

Why does industry require additional capital?

Industry requires machinery to process various raw materials and chemicals. These machines involve significant capital investment, which is essential for production.

What impact does this have on cost?

Maintenance of machinery is a major expense, and machines also have a defined working life. Their value is reduced every year through depreciation, which is added to the overall cost of production.

What has been the impact of international Geo political events on the industry?

The plywood and panel industry depends heavily on imported raw materials such as wood, core, face, and chemicals like methanol, formalin, phenol, and urea used in glue manufacturing.

Global disruptions, such as conflicts involving Ukraine or Iran, have led to an unexpected rise in the prices of these imported raw materials. This has directly increased production costs for manufacturers.

How was the month of March for the industry?

Throughout March, manufacturers struggled with rising costs. Since most orders were already booked at older prices, the industry had to absorb these losses.

Why did companies not increase prices despite rising costs?

Branded companies maintain long-term relationships with their dealers. Therefore, during price hikes, it becomes necessary to support them. For this reason, most companies did not increase prices in March.

Additionally, since March is the end of the financial year, business activities remain relatively slow during the last fortnight of March and the first fortnight of April. The industry have to  consider this while planning its strategy.

What is the expected future trend for raw material prices?

Global conditions are likely to remain unstable for some time, which may keep the prices of imported raw materials elevated.

Is the industry able to recover increased costs after this price revision?

Despite price increases, the industry is only able to partially recover the increased costs.

What has been the impact of rising costs on the industry?

The sharp rise in raw material costs has significantly increased the working capital requirements of the industry. This will require fresh capital investment, which may further increase costs.

Strong industry players will overcome these challenges through efficient operations. However, some weaker players may try to survive by selling products below cost.

Will this affect the market?

Yes, this may create temporary imbalance and confusion in the market. However, in the long run, such weak players may be forced to exit the market.

What should industry players do in this situation?

Industry players should face this challenging phase with patience and balance. They must remain stress-free and focus on strengthening their operational systems.

The industry must develop the capacity to withstand such sudden fluctuations. This resilience is the key to long-term success.

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