Ömer Karadeniz, Chairman of the Board of the Plastics Industrialists Federation (PLASFED), evaluating the impact of increasing freight prices on our competitiveness due to the disruption in the global supply chain experienced in the last 1 year, said: “Manufacturers are facing significant difficulties in both raw material and intermediate product supply and in exporting outside our close geography due to freight costs”.
Ömer Karadeniz pointed out that approximately 85% of the raw materials needed by the Turkish plastics sector are met through imports, and said, “Our sector converts these imported raw materials into value-added plastic products, making them subject to direct or indirect export. Especially, by enabling more than 30 sectors to which it provides intermediate input to be more competitive in foreign markets, and by preventing our industrialists from experiencing supply problems through domestic production, our sector has strategic importance with this feature. On the other hand, disruptions in the supply chain of the plastics sector cause a domino effect precisely for this reason, leading to production disruptions in almost all manufacturing industries. Furthermore, increases in plastic raw material prices or in the supply channels of these products are reflected to consumers as inflation in the medium term. From this perspective, the exorbitant increases in international transportation costs not only negatively affect our competitiveness in exports but also cause inflation due to their reflection on the costs of strategic sectors such as the plastics sector.”
Rising freight prices shorten the supply chain
Karadeniz stated that rising freight prices cause the supply chain to shorten, which entails both risks and opportunities for our country, and said, “The rapid increase in the cost of accessing European markets for Far East and Southeast Asian countries due to rising freight prices provides our country with a relative advantage in terms of competitiveness in this market. On the other hand, the increase in transportation costs from our country to Europe could further shorten the supply chain and cause our country to lose this vacated market share to rival countries. A more significant risk for our country stems from the imported intermediate inputs and raw materials our industry needs for continued production. Because rising freight costs cause inflation in producer prices through raw material supply and lead to our country losing the advantage it has against distant geographies. For this reason, measures that will ensure we are minimally affected by the increases in freight prices, both in raw material supply and access to export markets, should be implemented as soon as possible to allow us to seize this window of opportunity. Furthermore, the production of critically important industrial inputs such as plastic raw materials should be encouraged, and new facilities should be added to the one to be implemented in the Adana Yumurtalık region within this scope.”
Cost increases in production may be reflected to the consumer
The PLASFED President underlined that producer price inflation has negatively diverged from consumer inflation for the last 1 year, and at this point, consumer inflation has reached almost 2.5 times, saying, “In this past year, where producers did not reflect cost increases to prices, we saw that businesses' profit margins rapidly eroded. Frankly, it does not seem very likely for producers to continue bearing these cost increases without reflecting them in prices for a long time. Moreover, we can foresee that the already high producer inflation will increase further with the impact of freight prices on input costs. Given that consumer inflation is input-cost driven, measures to reduce our producers' costs should be implemented as soon as possible.”
This content has been translated using artificial intelligence technology.