With raw material prices rising, how should abrasive and grinding tool companies respond?

Release time:

2021-09-28

Author:

The sharp rise in raw material and energy prices has dealt a severe blow to the abrasive and grinding‑tool industry, driving up production costs significantly. Faced with this situation, how should companies respond?

　　The National Bureau of Statistics recently released first-quarter economic data. The figures show that the consumer price index rose 5.0% year on year, while industrial producer input prices surged significantly compared with the same period last year. Meanwhile, the National Development and Reform Commission raised on-grid electricity tariffs in 16 provinces, domestic coal prices have risen for four consecutive weeks, and global coal prices have hit new record highs, indicating a sustained and sharp increase in energy costs. These substantial hikes in raw material and energy prices have dealt a severe blow to the abrasive and grinding tools industry, driving up production costs sharply. Faced with this situation, how should companies respond?

　　I. Recently, due to political instability in oil-producing countries such as Libya, as well as the earthquake and nuclear crisis in Japan, international oil prices have surged, climbing close to $110 per barrel. Coal prices have also risen sharply, directly plunging power utilities into severe losses. In response, the National Development and Reform Commission promptly raised electricity tariffs to address the current financial challenges faced by these enterprises. The increase in energy prices will directly threaten certain abrasive and tool‑making companies, particularly those that produce silicon carbide and alumina abrasives.

　　Rising coal prices are putting significant cost pressure on many enterprises. As China’s coastal regions enter the peak‑demand summer season, coal import volumes are expected to increase further, driving international coal prices higher. Currently, the benchmark price for thermal coal has reached a record high of $129.85 per tonne. Meanwhile, as of last week, the Bohai Rim thermal coal price index has risen for four consecutive weeks.

　　On April 18, 2011, reporters learned that the National Development and Reform Commission had raised on-grid electricity prices in 16 provinces nationwide one week earlier. Among them, Shanxi recorded the largest increase, at 2.6 cents per kilowatt-hour; five provinces including Shandong raised rates by 2 cents per kWh; two provinces including Henan increased rates by 1.5 cents per kWh; three other provinces raised rates by 1 cent per kWh; one province raised rates by 0.9 cents per kWh; and four provinces raised rates by 0.4 to 0.5 cents per kWh.

　　Coal prices in Shanxi have risen by 10–30 yuan per ton. On April 21, a reporter learned from the China Coal Resource Network that, driven by factors such as the fourth consecutive weekly increase in the Bohai Rim thermal coal price index, the upward trend has spread to mine-mouth prices. This week, coal prices in Datong, Taiyuan, and other areas in Shanxi have all recorded notable gains, with increases ranging from 10 to 30 yuan per ton.

　　II. Following the sharp price increases in cotton, rare earths, and other commodities last year, prices have remained at elevated levels, fluctuating around those highs this year. Recently, raw material prices—such as rare earths, alumina, and epoxy resin—have begun to show signs of rising again, directly driving up production costs for abrasive and tool manufacturers. Unless companies raise their product prices, their very survival is put at risk.

　　The start of the new cotton‑planting season has helped push cotton prices lower, and in the future, coated‑abrasive products may see price cuts. Since September 2010, cotton prices have surged, accelerating from 18,000 yuan per ton; as of this week, domestic spot prices remain around 30,000 yuan per ton. According to an in-depth investigation by our reporter, despite an expected increase in planted acreage this year, cotton prices are likely to keep rising until the October harvest season, potentially reaching new highs after May. Cotton prices rose 20% in the first quarter of 2011: during that period, spot prices generally trended upward. January saw modest, steady gains, but starting mid‑February—around the tenth day of the Lunar New Year—the market experienced a sharp spike, with prices surging more than 10% in just ten days. By March, prices had climbed to a peak before retreating.

Keywords:

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