Russia-Ukraine crisis: Consumer durables firms in wait-and-watch mode

Consumer durables firms are closely monitoring the Russia-Ukraine crisis as it has already impacted the movement of vessels while commodity prices have started to escalate further.

Freight costs have gone up and there is a shortage of vessels as well. Also, the lead time is expected to go up due to fewer vessels operating during the crisis. 

“All vessels coming in and going to Europe have been impacted due to the Russia-Ukraine war and freight costs have already begun to escalate by 10-15 per cent. 

Adding to the worry is that lead time for vessels could go up to 75 days,” Avneet Singh Marwah, chief executive officer (CEO), Super Plastronics, the brand licensee of Kodak, Thomson, Blaupunkt and Westinghouse, told Business Standard.

He added that plastic prices have already gone up by 4-5 per cent in the last week and there is a possibility that it could go up by another 8 per cent in the next two weeks.

Freight costs had only recently started to stabilise, which were on the rise during the pandemic. 

However, the situation will be clear in the first week of March, Marwah said.

The industry, however, is better prepared for the forthcoming summer season as it has stocked up on finished inventory as well as raw materials. The industry faced two washed out summers due to Covid lockdowns in the preceding two years. 

The industry has already increased prices over the last one year to the tune of 15 per cent due to higher raw material and freight costs. 

With the ongoing crisis, the possibility of another price hike cannot be brushed aside as commodity costs and freight have started to inch higher.

“The impact (of the Russia-Ukraine war) will not be felt immediately. It will be felt over the next two-three months,” Kamal Nandi, head and executive vice-president at Godrej Appliances said. 

He added that the industry has already stocked up on raw materials till March. However, the ongoing situation will cause input costs to increase. The industry may have to pass on higher raw material prices to consumers, going forward. 

But, depending on how the situation pans out, and the extent to which costs escalate, the industry will have to take a call on price hikes.

Consumer Electronics and Appliances Manufacturers Association (CEAMA) president Eric Braganza said that the appliances and consumer durables industry has witnessed a series of price hikes over the past year.

However, he expects price increases to not be so high in the short term. 

“The current quarter has seen a rise in commodity inflation and we expect the price hike to be around 5 per cent. Currently, the growing tension between Russia and Ukraine may not have an immediate effect because the industry has stocked up for the season and is optimistic on a good summer. Thus, in the short run, the price hike due to commodity inflation may not be exorbitant,” he said, cautioning that freight costs and vessel availability are crucial.

“The pandemic led to supply chain disruption and an increase in global freight rates. Thus, ensuring reasonable shipping costs will go a long way in controlling commodity prices. The current crisis between Russia and Ukraine may have an adverse impact on the industry. This is because it would lead to a hike in global oil prices and eventually result in higher freight costs,” Braganza added.

Usha International also expects import costs to go up due to the crisis and said that there could be a scarcity of minerals like copper, which will cause its cost to go up.

“The surge in crude oil prices and the prospects of a recession in Europe are likely to lead to an increase in import costs. Given that Ukraine is a major source of metals like copper, it could also result in a scarcity of the metal, leading to rising mineral costs,” said Dinesh Chhabra, CEO, Usha International.

Panasonic is well prepared for the upcoming summer sales but is closing watching the movement of input costs, Manish Sharma, CEO, Panasonic India & South Asia, said.