West Asia crisis: Rising input costs may push up consumer durables prices

Copper and aluminium prices are surging, crude is climbing and the rupee is weakening, raising input costs for appliance makers as geopolitical tensions strain supply chains

Rising raw material prices, caused by the ongoing military escalation in West Asia, may impact the final prices of consumer durables. This comes amid the already rising prices of commodities like copper and aluminum, used heavily in the production of durables like air conditioners, washing machines and refrigerators, among others. 

 

Prices of copper have risen almost 25 per cent in the last few months and aluminium prices, too, are at a lifetime high, which is impacting input costs negatively, industry executives point out. 

 

Rising crude prices and a depreciating rupee will lead to a further hike in these costs.

 

“Geopolitical tension in the Middle East is beginning to reflect in global commodity markets. India imports a significant portion of its crude oil through the Strait of Hormuz, and any disruption or escalation in the region tends to create volatility in prices. In the past two days, Brent crude has appreciated by around 10 per cent while the rupee has depreciated by about 0.6 per cent,” said Kamal Nandi, business head and executive vice-president, appliances business, Godrej Enterprises Group.

 

These, he added, are not just macroeconomic indicators, but directly translate into higher input costs.

 

“Higher oil prices drive up the cost of essential raw materials such as polypropylene, styrene monomer, and ABS,” he said. These elements are fundamental to manufacturing refrigerators, washing machines, air conditioners and other appliances.

 

While the impact of the ongoing developments is yet to be fully understood, B Thiagarajan, managing director (MD) at Bluestar, said the first things to watch out for are how costs will rise and how demand will be impacted.

 

“In this context, we have to see whether summer demand, which we all have been looking forward to, will hold or not. What kind of growth we see now will have to be assessed,” he added.

 

So, while companies hold out hope, logistics and supply chain disruptions are being closely monitored.

 

"Our immediate focus remains on optimising internal efficiencies to absorb these shocks as much as possible. However, if the upward trajectory of crude and the weakening of the rupee persist, it will put pressure on consumer pricing in the near term,” Nandi added.

 

Such geopolitical tensions, another executive said, have prompted them to enhance focus on the domestic market.

 

“We have been trying to ramp up exports for a while, but the geopolitical developments have been very rapid and stability has been elusive. This has become a hindrance for us when it comes to formulating a long-term international strategy,” the executive said.

 

“While ramping up exports can be looked at later, the domestic market is where the focus will remain for the medium term,” the executive added.