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Raw Material Surge Squeezes Blue Star Margins
29 Sep
Summary
- Blue Star's raw material costs have surged over the past year.
- Copper prices increased by 41%, aluminum by 21%, and steel significantly.
- A recent 8% price increase may not fully offset rising costs.
The Managing Director of Blue Star has indicated that the company may need to implement further price increases due to escalating raw material and logistics expenses. Over the past year, significant price hikes for copper, aluminum, steel, and high-density polyethylene have been observed. Concurrently, both ocean freight and domestic transportation costs have also risen substantially.
Copper prices have seen a substantial rise of 41% over the last year, increasing from $10,233 to $14,450. Aluminum prices have climbed approximately 21%, reaching $3,250 per metric tonne from $2,672. Steel prices have also increased from Rs 49,200 to Rs 64,000, and HDPE has gone up to Rs 134 per kg from Rs 91.
Blue Star had previously aimed for a 13% price increase, but only about 5% was successfully passed on to consumers. The recent 8% increase is unlikely to fully absorb the cost escalations, potentially leaving a 5% gap. While margins were significantly impacted in the June quarter, the company must balance passing on costs with maintaining consumer demand. Developments in West Asia are also being monitored for their potential impact on freight costs and price volatility.
