COMMODITY PRICE RECORD THREATENS CREDIT LINES AND BUSINESSES

Tuesday, 9th march 2021 | General News
Marco Arezio - Consulente materie plastiche - Commodity Price Record Threatens Credit Lines and Businesses

The international situation of plastic raw materials which is leading to incredible price increases, in a continuous run-up to records due to a huge shortage of supply, is putting a strain on the companies' procurement capacity.

One of the decisive reasons concerns the company credit lines, which were calibrated on a financial trend where raw materials had lower prices and, which now do not give companies the willingness to finance their purchases of raw materials according to the new market prices.

In addition, some financial institutions are working against the trend, with the aim of reducing liquid assets for companies in the short term due to the fear of the consequences on fluctuations. violent commodity prices.

This thesis is supported by the idea that such a high price level can depress company profitability and negatively affect balance sheets, considering that at this moment customers have two alternatives: stop production due to lack of raw material or produce by making a loss on contracts already acquired.

But the question that is constantly circulating among the operators of the sector is when will it return to a normal situation.

A fairly shared response sees the return to a calmer situation on the markets when the United States were to resume production of raw materials on a regular basis. A regularity that has been lacking due to the pandemic, the winter storms that have paralyzed a part of the country and due to the sea logistics crisis.

The timing for the return to normal, however, remains uncertain pending some essential elements:

• The improvement of the Covid situation in the United States which, following the massive vaccination campaign, will allow a complete return to work.

• The season of storms must definitely pass

• The return of a fair distribution of empty containers around the world so as to allow the resumption of trade routes again.

Automatic translation. We apologize for any inaccuracies. Original article in Italian.

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