Uganda: Plastic Companies Wary of Rising Cost of Inputs

Plastics manufacturers have said the increasing cost of raw materials from source markets is expected to impact local prices in the near future.

This comes at a time when, according to manufactures, a tonne of raw plastic materials, a key input in the manufacture of plastic products, has increased by nearly 100 per cent from $900 (Shs3.3m) a year ago to $1,900 (Shs7m).

Speaking in an interview at the weekend, Mr Musa Mugeere, the Luuka Plastics managing director, said since last year, prices of raw materials for plastics have gone through the roof, impacting their capacity to efficiently operate. About a year ago, he said, a tonne of raw plastic materials would be imported at $900 (Shs3.3m) but this has since increased by nearly 100 per cent to $1,900 (Shs7m).

"We are not even sure where the price will be in the coming months. Every other month suppliers have been reviewing rates upwards," he said, noting the increasing cost has eaten into the company's returns, amid low demand resulting from a reduction in customers' purchasing power.

Mr Mohamed Lalan, the African Polysack managing director, said that whereas prices had surged to unpreceded rates, there has been some resistance from local manufacturers in the region and outside, which might force suppliers to review rates.

For now, he said, many plastic manufacturers have either had to absorb the increase or scaled down on inventory and production, which is expected to impact employment and eat into earnings.

He also noted that the prices of raw materials have been relatively stable in April and are expected to stabilise further in May and June. Uganda is a net importer of plastics inputs much of which are sourced from India, United Arab Emirates, and Saudi Arabia.

The increase has largely been blamed on UAE's decision to trade more with US and the devastating effects of Covid-19 in another source market, India.

Mr Allan Ssenyondwa, the Private Sector Foundation Uganda director for policy, said it would be difficult for local producers to absorb the prices for a long time if stability does not return in supply markets.

"Economically and commercially speaking, if the price of raw materials increase, it is automatic that the price will increase on the commodities," he said, noting there was little that local producers would do if the international market remains shaky.

Cause of spike in prices

The price hike has been mainly caused by diversion of most raw materials from UAE to US to cover a huge shortage in the country.

It has also been blamed on the devasting impact of Covid-19 in India, a key source market for plastics raw material for a number of African countries, including Uganda.

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