Since the second half of last year, the prices of sanitary products exported by China have gradually increased. In early 2018, sanitary ware companies collectively increased their prices by 5-12%, setting off the first wave of price increase this year. Four months later, as the prices of raw materials continued to rise, many sanitary ware companies announced that they raised product prices. The industry’s second wave of price increases was in full swing.
So what caused the price of the product to keep rising?
The rising cost of raw materials, labor, and logistics is the main reason for rising product prices.
In recent months, the prices of raw materials such as waste paper, nickel and copper have continued to rise, and the operating costs of enterprises have further increased. In addition, the increase in labor costs and logistics costs also brings certain pressure on the company.
Raw materials: Taking paper prices as an example, affected by the decline in waste paper imports, the price of raw paper jumped only in early May, with a maximum increase of 500 yuan per ton. Affected, many carton plants increased their prices, and the highest prices rose. 20%. Metal nickel, some experts said that due to the recent destocking of stainless steel to start, stainless steel prices are rising strongly, is expected to stimulate the electrolytic nickel prices to a new high. Nickel is one of the main raw materials for faucet production. The increase in nickel price will directly affect faucet manufacturers.
Labor: Although many companies’ plants are already being automated and intelligent, in the long run, the factory still needs a large number of workers to maintain production, and with the increase in the cost of labor, the pressure for the survival of enterprises is further increased. Some media quoted Zhao Xianglai, general manager of Tangshan Hexiang Electromechanical Co., Ltd., saying that because of the environmental conditions and difficulty in recruiting workers, the current cost of manpower in the sanitary ware industry continued to climb. The average monthly salary of an ordinary refinishing worker is now 8000 yuan. too much. According to statistics, labor costs currently account for 45% of the total cost in the bathroom production field.
Logistics: In addition to raw materials and labor, domestic logistics also carried out a comprehensive price increase this year. FedEx, UPS, and DHL have increased freight rates from January 1, 2018. UPS will not only increase the UPS land, air and international service charges by an average of 4.9% but will also increase the related surcharges for large parcels. DHL’s freight rates in various countries’ markets have also been maintained at about 4.9%. In addition, surcharges for businesses with more than 300 kilograms have also been raised. In addition, postal companies such as the United States Postal Service, France Post, and Dutch Post, as well as two German express companies, trans-o-flex and NightStar Express, also raised their freight rates.
In the end, the continuous appreciation of the renminbi against the US dollar was also a cause of the rising export prices of sanitary products in China. The chart below shows the exchange rate between the US dollar and the RMB exchange rate from May 23, 2017, to May 23, 2018. From this, we can see that the RMB has appreciated 7.5% against the US dollar.