As water goes down, prices will rise

[Mod]

As water goes down, prices will rise

THE NATION November 14, 2011


Water levels are receding, but just as transportation and other aspects of life improve, Thai consumers are bracing for another misfortune in the aftermath of the flooding - a spike in goods prices.
With nearly 100 major roads impassable and seven industrial estates inundated so far, floods have increased the operating costs of many manufacturers. While some, like Nestle and Toshiba, are doing their best to maintain prices, others - particularly those in the automotive and electronics sectors - may have to pass on the burden to consumers.

Suparat Sirisuwannangura, president |of the Automotive Industry Club under |the Federation of Thai Industries (FTI), |said the cost of auto production would increase dramatically due to the need to import components and parts for assembly in Thailand. Meanwhile, after the water recedes, auto-parts suppliers with plants in flood-hit areas will likely raise their prices. The good news is that vehicle prices will not be raised, as that would only exacerbate the situation.

"The increases would be priced in with the launch of new models or minor-change models," he said, adding that he was convinced auto-makers would now absorb the extra costs.

Apichart Lee-issaranukul, executive vice president of Thai Stanley Electric, the country's largest manufacturer of lighting equipment for vehicles, admitted that third-tier auto-part manufacturers would hike their prices, leading to an increase in the company's production costs. Still, Thai Stanley Electric will not immediately raise its product prices, as that would affect its clients, all of whom are major carmakers. The focus now is to deliver products as soon and in as large a quantity as possible, so that the clients can maintain their production-resumption schedule.

"We don't have any plan to adjust the product prices at the moment. We will absorb the higher costs to hold on to clients. Yet, we believe that our clients would understand if it comes to the point that we can't hold on any further and need to raise prices," Apichart said.

SUPPLY SHOCK

Floods have affected nearly 1,000 plants in seven industrial estates, including a sizeable number of auto-parts makers. This has sent a shockwave through the supply chain similar to that caused by March's earthquake and tsunami in Japan.

Honda Automobile (Thailand)'s 240,000-unit assembly plant in Ayutthaya is just one of the plants affected by the |shortage of components and parts. Toyota, with three plants in Chachoengsao and Samut Prakan, will resume production on November 21, after suspending operations on October 12, with parts imported from other countries. Though its assembly plant is located in Rayong, Mazda also had to suspend production. The industry is now convinced that Thailand's auto output this year will be lower than 1.7 million units.

The effects of the flooding will also be felt in the electronics market, particularly the personal-computer market, as more than a dozen hard disk drive (HDD) factories have been disrupted. According to International Data Corporation (IDC), this will have a direct impact on worldwide PC shipments through the first half of 2012.

In the first half of 2011, Thailand accounted for 40-45 per cent of worldwide HDD production. Nearly half of the Kingdom's production was directly impacted by the flooding as of early November. Though recovery is expected, the HDD supply is likely to remain constrained through the first half of 2012. In the worst-case scenario, total PC shipments could be depressed by more than 20 per cent in the first quarter of 2012, and HDD prices would rise on tight supply before stabilising in June.

Industry Minister Wannarat Charnnukul said in October that Western Digital, a major HDD-maker, may see exports from Thailand slide as much as 40 per cent to Bt120 billion. Western Digital supplies products to Hewlett-Packard, Dell and Acer.

Wong Waiming, chief financial officer of Lenovo - China's biggest maker of personal computers - said recently that flooding in Thailand will raise the cost of hard disk drives and affect personal computer supplies.

The good news is that prices of consumer goods should not move much.

Kobkarn Wattanavrangkul, chairwoman of Toshiba Thailand, said the company has no policy to increase the prices of its electrical appliances despite an increase in distribution costs of 30-40 per cent. Aside from the higher distribution costs, the company is spending hugely to rehabilitate 10 flooded plants in Pathum Thani.

"While ensuring minimum product shortages, we have absorbed all distribu-tion costs ourselves rather than pushing the cost burden to our dealers and consumers. We need to share the burden with the general public. Electrical appliances have become essential products in people's lives, and we should not use this time of difficulty to make any business profit," said Kobkarn.

Only one plant in Nonthaburi, which manufactures one-door refrigerators and digital kitchen appliances, remains operational, though most employees have been evacuated, their houses flooded. All 10 plants are expected to resume production by early next year.

Nophadol Siwabutr, corporate affairs director of Nestle Thai, said his company would maintain prices for as long as possible.

"This policy applies even to products imported to substitute for domestic shortages," he said.

Nophadol said that besides the plants in Ayutthaya and the Nava Nakorn Industrial Estate, which are flooded and not operational, the company has four other factories in Thailand: in Bangchan, Bangpoo, Chachoengsao and Amata Industrial Estate. Its Bangchan plant is still operating normally, but the firm is monitoring the flood water closely.

Some of Nestle's co-pack manufacturers, suppliers and distribution partners have been disrupted by the flooding, Nophadol said.

MANUFACTURERS NOT TO BLAME

The company is committed to mini-|mising any disruption to consumers as |well as to the supply chain and has activated all of its local and global resources to develop the best possible recovery solutions, he said.

"We are working with other co-pack manufacturers and our distribution and retail partners to re-supply the market as quickly as possible," Nophadol said.

He added that the company is already back in its factory at Ayutthaya working to restart production as soon as possible. Recovery plans are in place to restart the other factory that has been shut down as soon as the flood waters recede.

Hasan Basar, managing director of Bangkok Public Relations, a marketing communications agency, said the current increases in consumer goods prices are not generally due to price hikes by large manufacturers. Rather, he said, they are the result of increases in the prices of stock being sold off by traders and small retailers. He said they could be due either to the fact that they are small shops, making the logistical cost of replacing their stock higher, or, simply to traders taking advantage of the fact that demand is high while supply is low.

Large consumer-goods manufacturers, especially multinationals, will generally have very sticky pricing policies that change infrequently based on significant increases in raw-materials costs, or because of the introduction of new products.

"If the flooding and logistical issues |go away relatively quickly I don't expect large manufacturers to increase their |prices. They will want to maintain con-sumer goodwill. However, if the flooding and logistical issues continue for a long time, then we can expect large manu-|facturers to also increase their prices, |since the increases in costs of raw materials will make it unsustainable for them to produce without an adequate margin," said Basar.

[nookiebear]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

[Vombatus]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

What about the decent bars ??

[Prakhonchai Nick]

A case of Leo was 495bt in Tesco Lotus Surin today!

As long as the women maintain their prices we will be Ok!

[Mungbar]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

that would be wright just another excuse to get ripped off in Pattaya

[binnsy]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

Bet you had $$$$$$ flashing in yer head and could not wait to increase your prices my boy ;-)

[Prakhonchai Nick]

Hope CoCo isn't reading this thread!

[Vombatus]

Just watching quietly in the background..........

[Starman]

Starfoods just about keeping their heads above water. No immediate threat of price increases.

[nookiebear]

A case of Leo was 495bt in Tesco Lotus Surin today!

As long as the women maintain their prices we will be Ok!

Its been that price for several weeks,,,,,,,,,,You couldnt even find any to buy down in Sin City

[nookiebear]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

What about the decent bars ??

I wouldn't have a clue!!

[binnsy]

Starfoods just about keeping their heads above water. No immediate threat of price increases.

fCUK me thats a first ;-)
You fall off the bike and bang your head?

[nookiebear]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

Bet you had $$$$$$ flashing in yer head and could not wait to increase your prices my boy ;-)

Prices at Nookies are unchanged.........Still the best value in Isaan

[Starman]

Starfoods just about keeping their heads above water. No immediate threat of price increases.

fCUK me thats a first ;-)
You fall off the bike and bang your head?

Price freeze includes outstanding accounts. 

[Vombatus]

Prices have already shot up ............Beer in Pattaya bars up at least 10 baht small bottle.........

What about the decent bars ??

I wouldn't have a clue!!

    I know !!