| CHEMICAL INDUSTRY JOURNAL |
| chemical supply chain |
Building a winning pricing strategy in today’s highly volatile market Robert Smith
Customer Services Executive at Pricefx
Business plans and targets for 2022 need to be redrawn in the face of persistently volatile market conditions. Robert Smith, of Pricefx, explains how businesses can maintain focus in these challenging times. The chemical industry worldwide has been under siege by an ever-evolving series of challenges, including shortages of raw materials, supply chain bottlenecks, shipping and trucking delays, unprecedented cost increases and inflation, plant shutdowns and restrictions on movement, and a whole lot more. Just when it seemed it was time for things to settle down, a resurgence of Covid in some regions of the world, as well as war-related sanctions, have become the latest hurdles. Every factor has led to fluctuating (mostly increasing) prices and cost increases… so is it possible to stay on target? Ripple effects are easily seen in the industry. As an example, the shortage of urea is affecting industries worldwide,
including those fuelled by fertiliser and diesel. Urea is needed in Diesel Exhaust Fluid to keep diesel to run cleanly. China, the world’s largest producer of urea, stopped exports of the product because of fuel costs and the decline of diesel access. Another factor to this problem is the shortage of labour to drive these diesel trucks. Also a main ingredient in fertiliser, urea is needed for crops and field production, affecting spikes in food prices, and shortages around the world. Now, fertiliser is further stressed by Russia’s position as a significant supplier to some regions of the world. To appropriately suit up for what’s to come for the rest of this year, chemical industry players need to review and adjust their strategic pricing plans – often. Achieving margin goals that support earnings must take precedence but need ongoing focus to ensure success.
COMMODITY VS. SPECIALTY PRODUCTS Our current challenges should not deter producers of specialty products from seeking recognition of differential value, with pricing reflecting the differences. It’s actually more important to emphasise this in dynamic environments. Many commodity product areas need to prioritise recognition of increases in underlying costs and frequent price changes for nimble pricing actions to achieve margin goals. Be particularly sensitive to significant changes in logistics costs, which should drive surcharges or targeted cost recovery actions.
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