As the global economy continues to throw curveballs at various industries, commodities and associated manufacturers, distributors, workers and consumers are among those feeling most of the pressure. So how can these effects be mitigated without costing consumers and business unreasonable amounts? A world leader in all things tungsten, Almanty Industries focuses on mining, processing and shipping tungsten around the world. Company CEO Lewis Black shares the challenges that automotive and energy companies are currently facing and how these industries can overcome them in this exclusive Q&A.
What are some of the biggest impacts of steel and metal shortages and which industries are being hit the hardest?
Black: From Almonty’s perspective and what we’re doing with the tungsten industry in South Korea, the construction industry is definitely feeling the brunt of the impact. Even though the material is available, the price is extraordinarily high, and we are seeing enormous cost escalation and delays in delivery times.
The industry is moving forward and accepting these challenges, but things now take longer to build and cost more to accomplish. The redeeming quality is that silver is still incredibly cheap, which has helped to mitigate these cost escalations.
The problems arise when inflation keeps rising and governments keep raising rates to counter it, which is another problem. Today, companies with projects are moving forward with optimism because they have no choice. The increase in the time required for construction and its impact on labor costs can, predictably, cause a movement within unions demanding compensation for their workers to counter inflation.
How are the semiconductor and automotive industries affected by this?
Black: The semiconductor industry is experiencing shortages due to demand far outstripping supply. It’s interesting because the industry is generally assumed to be a relatively simple product to produce, when in fact, it’s anything but. The creation of this type of product is technically advanced and takes about nine weeks to manufacture a semiconductor. From the tungsten point of view, tungsten gas has to be pumped into each semiconductor, so increasing the capacity becomes a huge undertaking for the factory.
Are there specific initiatives that can be taken to mitigate these challenges?
Black: As a manufacturer, you are caught in a delicate situation. You will continue to see costs increase and how much of that cost you can pass on to the consumer has not yet been assessed. There is an inherent apprehension about the amount to be passed on to the consumer. Consumption indices and inflation increases of 4-5% are not the same for commodities, in fact, it is much higher than these figures. We are seeing increased caution from manufacturers regarding the consumer aspect.
At this point, it’s only a matter of time before we start seeing price escalations. As the saying goes, “No one can hold back a rising tide”.
Companies are very reluctant to pass on some of these costs because of headlines and hearsay that don’t apply to them. In Spain, for example, the cost of energy is 400% higher than before, impoverishing millions of people. The central government’s response was to accuse the energy companies of price gouging and say they were going to introduce legislation to seize their profits and distribute them to the people. Of course, they didn’t because in a democracy you can’t do that. It was even an absurd proposition because it had nothing to do with the energy companies – the market sets the price, not the companies.
This is exactly what manufacturers are hesitant to do – get caught in the crosshairs of this type of situation when they pass the costs on to consumers.
Any final thoughts you would like to add?
Black: Inflation will inevitably get worse before it gets better. You can analyze a market and make predictions all day, but what you cannot do is control what the government is going to implement. If a government continues to spend money, the problem gets worse. Inflation is not a mysterious economic concept.
To learn more about Almonty Industries, visit almonty.com