As the global economy continues to throw curveballs at various industries, raw materials and associated manufacturers, distributors, workers, and consumers are among those feeling the bulk of the pressure. So, how can these effects be mitigated without costing consumers and company’s unreasonable amounts? A global leader in all things tungsten, Almonty Industries focuses on the mining, processing, and shipping of tungsten across the world. The company’s CEO, Lewis Black, shares the challenges automotive and energy companies are currently navigating and how these industries can overcome them in this exclusive Q&A.
What are some of the most significant impacts of the steel and metal shortages and what industries are being hit the hardest?
Black: From Almonty’s point of view and what we are 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 witnessing a huge escalation in costs and delay in delivery times.
The industry is moving along and accepting these challenges, but things are now taking longer to build and it is costing more money to accomplish. The redeeming quality is that money is still unbelievably cheap which has helped in mitigating these cost escalations.
Problems arise when inflation keeps rising and governments continue to raise rates to counter it, which is another issue. Now, companies with projects are optimistically moving forward because they have no choice. The increase in time it takes to build and its impact on the costs for labor can predictably cause a movement within labor 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 outweighing supply. It is interesting because it is commonly assumed that the industry is a relatively straightforward product to produce, when in fact, it’s anything but. Creating this type of product is technically advanced and takes around nine weeks to make one semiconductor. From a tungsten point of view, one must pump tungsten gas into every semiconductor, so increasing capacity becomes a huge undertaking for the factory.
Are there any specific initiatives that can be taken to mitigate these challenges?
Black: As a manufacturer, you are caught in a tricky situation. You will continue to see rising costs and how much of that cost you can push onto the consumer is yet to be evaluated. There is an inherent apprehension about how much to pass on to the consumer. Consumer indexes and inflation rises of 4-5 percent are not the same for raw materials, in fact, it is much higher than these figures. We are seeing extra caution from manufacturers regarding the consumer aspect of it.
At this point, it is just 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 off some of these costs because of the price gouging headlines and hearsay that does not apply to them. In Spain, for instance, energy cost is 400 percent higher than previously recorded, impoverishing millions of people. The response of the central government 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 have not done that because in a democracy you cannot just do that. It was an absurd proposition to even state because it had nothing to do with the energy companies – the market sets the price, not the companies.
That is exactly what manufacturers are reluctant to do – get caught in the crosshairs of this type of situation when passing costs off to consumers.
Any last thoughts you would like to add?
Black: Inflation is inevitably going to get worse before it gets better. You can analyze a market and forecast 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 is compounded. Inflation is not a mysterious economic concept.
To learn more about Almonty Industries, visit almonty.com
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