Every industry across the world is currently faced with price increases. Many nations report high inflation numbers and this is not expected to change anytime soon. How come this happened and how does that affect the protective clothing market?
Since the beginning of this year, we notice a strong economic recovery in all kinds of industries. Demand for many products picked up as a result of which supply chains suddenly had to produce much more than before. And since then we have seen an enormous snowball effect. There is still an unbalance today between supply and demand, which not only leads to ongoing price increases but moreover also to continued supply issues and shortages.
The driving factors that increases prices for protective clothing
Within the protective clothing industry we first saw polyester cotton prices increase significantly. Then we were affected by the container transport crisis, which by the way is expected to last well into 2022. Next we saw all chemical related materials like dyestuff increase in price, all technical fibres and to top it all, we went into an energy crisis in Europe with prices becoming multiples higher than before and no perspective on when this will stabilize again.
Squeezed between growing costs and contract limitations
The challenge for protective clothing is that we are coming from almost a decade of more or less stable prices. Many contracts in place, especially with end users, are multi-year contracts with often limited to no possibilities to change prices. This was not an issue given the stable situation we have known for long. However today this poses huge challenges on our industry.
Many partners in the value chain are squeezed between the increasing costs at one side and the limitations to pass on price increases on the other. For sure those responsible at end users know very well what’s going on but unfortunately in some cases they don’t want to hear about this and just refer to the terms of the contract.
Of course contracts are agreed upon mutually but they were also made in a period where we never knew we would end up in this crazy world that we are living in today. Most contracts do have a “force majeure” clause. And if there would ever be a situation where this clause would apply, then to my humble opinion that would be now. Nobody could have ever foreseen that we would end up in this situation and that we would be faced with these incredible price increases.
“Most contracts do have a “force majeure” clause. And if there would ever be a situation where this clause would apply, then to my humble opinion that would be now.”
The risk of supply issues is around the corner
To that point this crisis not only leads to higher prices, but also to serious supply issues. In other words; for many customers security of supply has become even more important than price. Those that believe that by forcing their supplier to stick to the contract with regards to pricing although they are very well aware of the market situation, in the end they will pay the price by not receiving the goods they need. Either because they force their supplier to supply with negative margins and as such putting at risk the continuity of the company possibly resulting in a bankruptcy. Or the supplier is forced to stop deliveries as they cannot afford to work against those outdated price levels. Either way, this will only lead to a lose-lose situation.
The conclusion of all of this is clear; these are unique circumstances and we desperately need each other in the supply chain. So let’s work together and jointly manage ourselves through this difficult situation to try and minimize the impact and spread the pain across all involved, from raw materials down to the end user. We may not see this is a true win-win but at least we can say; a problem shared is a problem halved!