Petrol price increases force rethink for manufacturers

Manufacturers are being severely affected by the continual incline of fuel prices throughout Australia, with freight costs associated with transporting goods one of the main concerns. 

As petrol prices recently hit $1.60 per litre in some parts of Australia, the days of sub $1.00 per litre petrol appear long gone.

Political tension in the Middle East and the recent tsunami in Japan are largely driving up current prices; and countries such as Libya, one of the world’s major oil producers, are also experiencing civil unrest.
 
All these world events are pushing up petrol prices in Australia to its highest levels since October 2008.
 
Manufacturers are also facing freight costs associated with suppliers and other businesses they deal with, as well as general day-to-day costs such as visiting clients.

Allplastics, which specialises in the machining, fabrication and supply of thermoplastic materials, has not yet witnessed any impacts on its business due to increased petrol prices – but it is certainly something which is on the horizon.
 
"Freight companies are putting up their pricing and there are also indications that a lot of the polymers that are used in the production of plastics might be going up. But we’re not certain by the percentage yet," Vic Kalloghlian, managing director at Allplastics, said.
 
There are two ways manufacturers will be able to deal with increased petrol prices – absorb the costs into their own company or pass on the costs to customers through higher prices.
 
"We try and pass that on, but we can’t do it in every instance. There are certain long-term agreements and contracts that we have entered into, so sometimes it’s difficult to pass that on immediately," Kalloghlian said.
 
"We’ve had signals in the last three years of huge increases, but it hasn’t materialised because of market pressures, or the GFC might have had something to do with it.
 
"We’ve seen mainly freight prices increase. Suppliers have passed on or signalled there will be freight price increases starting from next month and the month after,"  Kalloghlian said.

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