These industries want to keep increasing their prices

Inflation is thus further fueled by the manufacturing companies. “The problem is that many price increases have not even reached the end customer because they are passed through the supply chain in several rounds of price increases and collective bargaining is pending,” explains Sauter.

But it is questionable whether the companies can pass on the burdens in full. In the first half of the year, they managed to do this well: substantial price increases were possible because customers practically snatched the products out of their hands.

With the increasingly gloomy economic prospects and the associated reluctance to place orders, this is becoming more difficult. “They have to weigh up the extent to which they can further increase their prices individually and with great sensitivity, without reducing sales, i.e. volumes, too much. It will be a balancing act,” says industry expert Sauter.

chemical industry

In the chemical industry, numerous international manufacturers, especially from the special segments, have already made it clear that they want to pass on the high costs for gas and intermediate products to customers.

There are positive signals on the raw materials side from petrochemicals, where the prices for basic chemicals such as ethylene and propylene have recently been stable or even declining. This can relieve the processing chemical companies.

However, many experts doubt that this will remain the case after the summer months. In any case, such an effect in the chemical processing chains through to special products is only likely to have an effect in the medium term.

The world’s largest chemicals trader, Brenntag, continues to firmly believe that it will be able to pass on the higher costs to the market. For the coming weeks there is no indication that demand in the chemical industry could collapse. “For many of our customers, price comes third. They are still concerned with availability, i.e. whether they can get the products and when,” says Brenntag CEO Christian Kohlpaintner.

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However, this effect could weaken in the fourth quarter if Europe and the US do slide into recession. Companies that would then be sitting on full warehouses with expensive chemicals and plastics would then probably hold back with new orders.

Food:

Further price increases are also to be expected for food. It is true that consumer prices for food and non-alcoholic beverages increased by 16.6 percent in August compared to the same month last year. But the higher prices in the supermarket do not reflect the extent of the rising production costs.

For example, producer prices for butter rose by 75.2 percent in July compared to July 2021. Consumer prices for butter, on the other hand, increased by only 47.9 percent. In the case of grain flour, producer prices rose by 48.9 percent in July, but consumer prices only rose by 34 percent.

The HWWI raw materials index for food and beverages rose by 56 percent in the first half of the year compared to the same half of the previous year. The production of food is very energy-intensive. “The continuing rise in electricity and gas prices means further enormous cost pressure for the food industry and is bringing it to its breaking point,” according to the Federal Association of the German Food Industry (BVE).

Confectionery manufacturer Haribo has already announced that it will increase its prices in the coming months. Although the pack of Goldbears still has the recommended retail price of EUR 0.99, it will only contain 175 grams instead of 200.

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Prices should also continue to rise in gastronomy, also because the minimum wage will rise in October. Nikolas Niebuhr, Germany head of the Espresso House coffee house chain, expects companies in his sector to massively increase prices by October at the latest. “Certainly many in the double-digit range.”

“The cost increases that manufacturers are facing are increasingly jeopardizing operational safety and thus employment,” warns Stefanie Sabet, Managing Director of BVE. She calls for unbureaucratic support for companies, also to alleviate the pressure on end consumer prices.

steel

The steel industry has been benefiting from high prices for its product since the peak of the corona pandemic. The level has now stabilized because demand from important customer segments such as automotive production and the construction industry has recently eased. However, experts anticipate that prices will continue to rise, which is not due to the good demand situation but to the high production costs.

The Steel Industry Association, for example, calculates that the gas levy alone will incur annual additional costs of EUR 500 million for the industry. If you look at the market-driven price increases for gas alone, the additional costs without the apportionment even amount to seven billion euros compared to the previous year.

“The gas surcharge increases the cost pressure on the steel industry, which already exists due to the extreme price increases on the energy markets,” says Hans-Jürgen Kerkhoff, President of WV Stahl.

mechanical engineering

Although foreign demand for machines has recently dropped, German machine builders are posting a steady increase in sales. This is mainly because many of them have significantly increased their prices. The Association of German Machine and Plant Builders (VDMA) reported a few days ago when it announced the half-year figures for the industry that exports had increased nominally by 2.3 percent.

In real terms, however, exports fell by 3.7 percent – ​​so price increases alone were responsible for the increase.

It is not to be expected that the situation will calm down. On the one hand, prices for steel, plastics and electronic components are likely to continue to rise as a result of the energy crisis. On the other hand, many machine builders are still affected by material shortages.

Many industry representatives are convinced that they can pass on their costs to customers. In a survey conducted by PwC in May, 78 percent of the companies had already announced that they wanted to increase the sales prices for their products.

construction industry

The high costs of building materials such as rebar, which reinforces concrete components, cement or bitumen have long caused a slump in demand in the construction industry. Numerous projects in the planning stage have already been canceled or postponed in the hope that the price pressure could ease in the foreseeable future.

However, there are hardly any signs of this. On the contrary, many experts anticipate that costs will continue to rise over the next two years.

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A study by PwC comes to the conclusion that construction costs – driven by high material and energy prices, a shortage of skilled workers and increasing requirements due to more regulation – could rise by a total of 20 percent in the next two years.

The price pressure is also fueled by a recovery in demand, which many experts are expecting. For example, Anna Prahl, PwC manager in the area of ​​real estate, estimates: “We assume that many clients will make catch-up investments in the coming years.”

automobile

The big car manufacturers made excellent earnings in the first half of the year – despite or perhaps because of the lack of semiconductors. Vehicle production had to be curtailed due to the lack of chips. On the other hand, the car manufacturers were able to raise prices and cancel discounts due to the high demand.

But the car manufacturers now have to adjust to a more difficult business environment with falling margins, as the consulting firm EY predicts. There is no sign of relaxation in material, logistics and energy prices. And with the looming global recession, there could be increasing problems on the demand side, warns EY. It seems questionable whether customers will keep going with further price increases.

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