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RETAIL PRICES RISING MORE QUICKLY
Retailers, both online and in physical spaces, are updating prices often, sometimes more than once a day, in responses to price hikes triggered by product shortages and shipping difficulties, The Wall Street Journal reported.
Quicklizard, which makes software that helps retailers automate pricing strategies, reported that about a third of the 100 retailers it works with are changing prices more than once a day, compared to 15 percent a year ago.
About 75 percent are raising prices more frequently in the past year, the company said.
Carparts.com is changing prices daily, no longer only two or three times a week, CFO David Menaine said to the WSJ.
B&R Stores, a chain of Nebraska supermarkets, is updating prices every week on 3,000 separate items, three times as many as in 2019, president Mark Griffin told the WSJ.
Constantly changing prices is tedious and labor-intensive, leading workers to put in overtime and prompting the stores to try electronic labels, Griffin said.
Retailers that fail to raise prices as their costs go up risk seeing their margins vanish, the WSJ noted.
“It raises a red flag for me when contractors are buying me out of something in particular,” Jeff Wachenfeld, who manages two Long Island hardware stores, commented to the WSJ.
“Why is everyone buying this all of a sudden? It’s because I’m too cheap,” he said.
He also is installing electronic shelf tags so prices can be updated digitally instead of by printing and pasting new labels.
ALUMINUM PRICES RISE ON UKRAINE FEARS
The price of aluminum, which has risen 24 percent since August to $3,100 per metric ton, faces new pressures as Russia is poised to invade Ukraine.
Russia is a major aluminum producer. If it attacks its neighbor nation, western countries are likely to impose embargoes on Russian exports, cutting the world’s supply of the basic metal.
That would worsen a shortage already exacerbated by rising energy prices that have shuttered plants in China and Europe that were unable to cut costs enough to remain profitable.
Aluminum is sometimes called “congealed electricity” because producing the metal requires so much energy.
Europe’s natural gas prices leaped as much as fivefold in recent months as winter began with the continent’s reserves at or near record lows and Russia curtailed its export of gas to the West amid political tensions.
Sky-high energy prices have forced Alcoa to close a Spanish plant turning out 228,000 tons a year until at least 2024; Spain’s electricity price set a record last year.
Norwegian producer Norsk Hydro will cut production at a European plant by 40 percent until energy prices become manageable, the company said.
Plants in France, Montenegro, and Romania also have cut back.
Europe is now producing about 810,000 tons less aluminum each year than in 2019, according to a Macquarie analysis, adding to a four-million-ton annual shortfall globally.
Aluminum stores in warehouses certified by the London Metal Exchange hold fewer than 850,000 tons, the lowest stockpile since 2007, FactSet reported.
Supplies could fall a million tons short of demand this year, Morgan Stanley analysts calculated, especially with lingering supply chain snarls slowing deliveries.
If China restarts production, any shortage could be made up quickly.
However, Beijing has capped aluminum production as part of its effort to improve the nation’s air quality and meet its Paris climate commitments.
Aluminum’s price could rise to $4,000 a ton, Luke Sadrian, chief investment officer at hedge fund Commodities World Capital, said in an FT interview.
“When you close an aluminum plant, you’re not just doing it for a couple of days,” he said. “Because of the power situation, aluminum might begin to trade like an ore in short supply and be a lot more volatile.”
China makes more than half of the world’s aluminum; the U.S. is the metal’s chief importer.
TREND FORECAST: We have tracked the increasing shortage and skyrocketing prices of industrial metals in articles such as “Cobalt Price Jumps as Supplies Tighten” (26 Jan 2021), “Nickel is the New Gold” (21 Sep 2021) “Lithium Prices Soar on China’s EV Boom” (1 Feb 2022).
These shortages, and the soaring prices they cause, will restrain global industrial production at least through 2025: new mines and processing plants can take years to bring into commercial operation and organized systems reclaiming and recycling these materials are in their infancy, if that.
Meanwhile, demand for appliances, electric cars, and other metal-dependent goods will continue to grow.
PRICE INCREASES BREWING AT CARLSBERG
Facing “very significant” increases in its costs, Denmark’s Carlsberg A/S, the world’s third-largest brewer, has announced it will pass those increases to its consumers.
The company will raise prices to beer drinkers by as much as 10 to 12 percent, it said in a statement.
Sales in 2021 passed pre-COVID levels, but higher costs will weigh on the company’s finances this year and higher prices “may have a negative impact on beer consumption,” CEO Cees ‘t Hart said in a statement announcing the hike.
Carlsberg’s revenue expanded by 10 percent last year and operating profits by 12 percent, but the company expects profit growth of no more than 7 percent this year and said profits could even be flat.
Carlsberg also brews Tuborg and Kronenbourg 1664 beers.
Last month, Constellation Brands, which makes Corona and Modelo brews, said it will raise prices more than the usual 1 to 2 percent this year.