As Water Goes Down, Prices Will Rise: Thailand

[webfact]

BUSINESS

As water goes down, prices will rise

NALIN VIBOONCHART,

KWANCHAI RUNGFAPAISARN

THE NATION

Water levels are receding, but just as transportation and other aspects of life improve, Thai consumers are bracing for another misfortune in the aftermath of the flooding - a spike in goods prices.

With nearly 100 major roads impassable and seven industrial estates inundated so far, floods have increased the operating costs of many manufacturers. While some, like Nestle and Toshiba, are doing their best to maintain prices, others - particularly those in the automotive and electronics sectors - may have to pass on the burden to consumers.

Suparat Sirisuwannangura, president |of the Automotive Industry Club under |the Federation of Thai Industries (FTI), |said the cost of auto production would increase dramatically due to the need to import components and parts for assembly in Thailand. Meanwhile, after the water recedes, auto-parts suppliers with plants in flood-hit areas will likely raise their prices. The good news is that vehicle prices will not be raised, as that would only exacerbate the situation.

"The increases would be priced in with the launch of new models or minor-change models," he said, adding that he was convinced auto-makers would now absorb the extra costs.

Apichart Lee-issaranukul, executive vice president of Thai Stanley Electric, the country's largest manufacturer of lighting equipment for vehicles, admitted that third-tier auto-part manufacturers would hike their prices, leading to an increase in the company's production costs. Still, Thai Stanley Electric will not immediately raise its product prices, as that would affect its clients, all of whom are major carmakers. The focus now is to deliver products as soon and in as large a quantity as possible, so that the clients can maintain their production-resumption schedule.

"We don't have any plan to adjust the product prices at the moment. We will absorb the higher costs to hold on to clients. Yet, we believe that our clients would understand if it comes to the point that we can't hold on any further and need to raise prices," Apichart said.

SUPPLY SHOCK

Floods have affected nearly 1,000 plants in seven industrial estates, including a sizeable number of auto-parts makers. This has sent a shockwave through the supply chain similar to that caused by March's earthquake and tsunami in Japan.

Honda Automobile (Thailand)'s 240,000-unit assembly plant in Ayutthaya is just one of the plants affected by the |shortage of components and parts. Toyota, with three plants in Chachoengsao and Samut Prakan, will resume production on November 21, after suspending operations on October 12, with parts imported from other countries. Though its assembly plant is located in Rayong, Mazda also had to suspend production. The industry is now convinced that Thailand's auto output this year will be lower than 1.7 million units.

The effects of the flooding will also be felt in the electronics market, particularly the personal-computer market, as more than a dozen hard disk drive (HDD) factories have been disrupted. According to International Data Corporation (IDC), this will have a direct impact on worldwide PC shipments through the first half of 2012.

In the first half of 2011, Thailand accounted for 40-45 per cent of worldwide HDD production. Nearly half of the Kingdom's production was directly impacted by the flooding as of early November. Though recovery is expected, the HDD supply is likely to remain constrained through the first half of 2012. In the worst-case scenario, total PC shipments could be depressed by more than 20 per cent in the first quarter of 2012, and HDD prices would rise on tight supply before stabilising in June.

Industry Minister Wannarat Charnnukul said in October that Western Digital, a major HDD-maker, may see exports from Thailand slide as much as 40 per cent to Bt120 billion. Western Digital supplies products to Hewlett-Packard, Dell and Acer.

Wong Waiming, chief financial officer of Lenovo - China's biggest maker of personal computers - said recently that flooding in Thailand will raise the cost of hard disk drives and affect personal computer supplies.

The good news is that prices of consumer goods should not move much.

Kobkarn Wattanavrangkul, chairwoman of Toshiba Thailand, said the company has no policy to increase the prices of its electrical appliances despite an increase in distribution costs of 30-40 per cent. Aside from the higher distribution costs, the company is spending hugely to rehabilitate 10 flooded plants in Pathum Thani.

"While ensuring minimum product shortages, we have absorbed all distribu-tion costs ourselves rather than pushing the cost burden to our dealers and consumers. We need to share the burden with the general public. Electrical appliances have become essential products in people's lives, and we should not use this time of difficulty to make any business profit," said Kobkarn.

Only one plant in Nonthaburi, which manufactures one-door refrigerators and digital kitchen appliances, remains operational, though most employees have been evacuated, their houses flooded. All 10 plants are expected to resume production by early next year.

Nophadol Siwabutr, corporate affairs director of Nestle Thai, said his company would maintain prices for as long as possible.

"This policy applies even to products imported to substitute for domestic shortages," he said.

Nophadol said that besides the plants in Ayutthaya and the Nava Nakorn Industrial Estate, which are flooded and not operational, the company has four other factories in Thailand: in Bangchan, Bangpoo, Chachoengsao and Amata Industrial Estate. Its Bangchan plant is still operating normally, but the firm is monitoring the flood water closely.

Some of Nestle's co-pack manufacturers, suppliers and distribution partners have been disrupted by the flooding, Nophadol said.

MANUFACTURERS NOT TO BLAME

The company is committed to mini-|mising any disruption to consumers as |well as to the supply chain and has activated all of its local and global resources to develop the best possible recovery solutions, he said.

"We are working with other co-pack manufacturers and our distribution and retail partners to re-supply the market as quickly as possible," Nophadol said.

He added that the company is already back in its factory at Ayutthaya working to restart production as soon as possible. Recovery plans are in place to restart the other factory that has been shut down as soon as the flood waters recede.

Hasan Basar, managing director of Bangkok Public Relations, a marketing communications agency, said the current increases in consumer goods prices are not generally due to price hikes by large manufacturers. Rather, he said, they are the result of increases in the prices of stock being sold off by traders and small retailers. He said they could be due either to the fact that they are small shops, making the logistical cost of replacing their stock higher, or, simply to traders taking advantage of the fact that demand is high while supply is low.

Large consumer-goods manufacturers, especially multinationals, will generally have very sticky pricing policies that change infrequently based on significant increases in raw-materials costs, or because of the introduction of new products.

"If the flooding and logistical issues |go away relatively quickly I don't expect large manufacturers to increase their |prices. They will want to maintain con-sumer goodwill. However, if the flooding and logistical issues continue for a long time, then we can expect large manu-|facturers to also increase their prices, |since the increases in costs of raw materials will make it unsustainable for them to produce without an adequate margin," said Basar.

-- The Nation 2011-11-14

[JohnDenver]

"Miracle" Thailand.

Isn't it "Amazing" that "MONEY, MONEY, MONEY" is not only limited to the "ladies."

PITIFUL.

[nong38]

What a surprise, I am sure many more will follow.

[Thaddeus]

Hang on a sec.

The headline is scary, inferring that there is going to be an inflation spike across the board, and then it bangs on about car manufacturers.

And then a little snippet in the middle.......

The good news is that prices of consumer goods should not move much.

Aren't all goods consumer goods?

[whatsupdoc]

"Miracle" Thailand.

Isn't it "Amazing" that "MONEY, MONEY, MONEY" is not only limited to the "ladies."

PITIFUL.

If the operation costs of a business rise significantly the costs will usually be passed on to the consumer. That's common practice all over the world.

[bino]

Aren't all goods consumer goods?

Actually, no.

Consumer goods are the final product sold to the end user.

Thai Stanley Electric as mentioned in the article is a supplier, in that they don't sell directly to the consumer. You can't walk into HomePro or BigC and find their products on display to be purchased directly from them. The car that you as an individual / end user can purchase and has their products added by the manufacturer is the "consumer goods".

[Thaddeus]

Aren't all goods consumer goods?

Actually, no.

Consumer goods are the final product sold to the end user.

Right, by that definition and the car manufacturers saying they will absorb the increased cost of producing the end product to the consumer, the headline is just scaremongering then.

(btw, I did know the difference, it was a leading question to make a point)

[bino]

Right, by that definition and the car manufacturers saying they will absorb the increased cost of producing the end product to the consumer, the headline is just scaremongering then.

Actually, no.

If you read the sentence from the article in its entirety:

"The increases would be priced in with the launch of new models or minor-change models," he said, adding that he was convinced auto-makers would now absorb the extra costs.

We have a Toyota VIOS, that is going to be 4 yrs old this month. Ms. Bino's niece bought a brand new one about 2 months ago. When parked side by side, it is easy to see that they are the same car, same body shape, engine, etc. However, there are a lot of "minor changes". Most noticeable are the taillights. In all likelihood, these were produced by Thai Stanley Electric.

When you figure that Thai Stanley is probably going to need to re-tool their factory after the taillight injection molding machines have been submerged for a month, it is probably safe to assume that they will make a minor change to the reflector pattern of the taillights or something like that, enough to justify them as being different / better. When that happens, Toyota is going to use this opportunity to pass the cost on to the consumer.

I also understand that the Fortuner is due for a major "new model" restyling for the 2012 model year. You can believe that the price is going to be considerably different, and probably even more so than anticipated before the flood.

[geriatrickid]

Hang on a sec.

The headline is scary, inferring that there is going to be an inflation spike across the board, and then it bangs on about car manufacturers.

And then a little snippet in the middle.......

The good news is that prices of consumer goods should not move much.

Aren't all goods consumer goods?

I think they meant local quickies as in food and non export items. The government will do its utmost to control prices inside Thailand. Foreign markets depoendent upon Thai export goods won't be so lucky. There won't be much they can do, since it takes time to build a new supply chain. Similar situation occurred with Japanese export goods. The prices will be adjusted once the Thai factories are back online. The export markets for the hard drives and rice don't have many alternatives except to pay. The key is if the prices stay high over the next year.

[JohnDenver]

MARK MY WORDS:

The prices of ALMOST EVERYTHING is going to increase, especially food-stuffs like rice and meats, and the "excuse" is going to be the floods. Anything, anything at all, to be found as excusable to gouge the people will be found. I guarantee it.

I won't be here to say, "I told you so." Just get yourself prepared for how you are going to feel when you are shafted once again by those who charge what they want and then steal more money from imports by-way of "customs-fees", etc. The only reason that any of this is happening across the world is BECAUSE "THE PEOPLE" ARE ALLOWING IT TO HAPPEN TO THEM. It is in-excusable, and it is despicable. If you let someone steal a little from you now and you DON'T SAY ANYTHING, the same corporate AND non-corporate opportunists/thieves will just keep pushing to see how much higher they can push it until they hear a moan.

I am not going to let this go...

The baht is ridiculously high, and has been for quite a while now, BUT THE COSTS OF PRODUCTS, ESPECIALLY PROCESSED-FOODS LIKE BREADS HAS INCREASED!!! You people who are going to make excuses for the theft of your money via over-charging need to get-with-the-program and demand that it stop, and the very best way that I know to do it is to get my affairs in-order and go back home where I DO HAVE A SAY IN HOW MY COUNTRY IS RUN/MANIPULATED. I have seen too much for far too long here, and I really don't give two $$$*$ if the door hits me in my tail on the way-out...just as long as I am out while the getting-is-good.

Enough is enough, and this TRULY WAS/IS THE LAST STRAW. We, as "ex-pats" or whatever the Hell other label is to be used for us Americans/Westerners living in this country need to finally realize that we have to take-care of our OWN COUNTRIES FIRST--get things in our own communities and families working-well--before we can even BEGIN to deal with anything here in Thailand. I know that this is a painful reality for most of you to realize, but you people really MUST face-reality and understand that even if we came here with the very best intentions to make things better where we taught/worked and lived in our community(ies) here in Thailand, this disaster and the manipulated financial collapses occurring across the planet are a HUGE wake-up call for us to get our priorities in-order once and for all because when all is said and done, very serious problems are going to occur everywhere on the planet, and I PERSONALLY want to be in my own nation, trying to take-care of my OWN community where my family and true-friends are.

Seeing events in the past couple of months, and many other "events" before that, made me finally realize that there is simply no reason for ME, PERSONALLY, to stay here, not the least of which is because if I am going to have to basically pay the same prices--AND HIGHER--for goods that I can get back in America, this is literal INSANITY FOR ME TO CONTINUE TO STAY HERE AND KNOWINGLY ALLOW MYSELF TO GET RIPPED-OFF AND HAVE ABSOLUTELY NO POWER WHATSOEVER TO STOP IT.

Enough truly is enough.

[Thaddeus]

this is literal INSANITY FOR ME TO CONTINUE TO STAY HERE AND KNOWINGLY ALLOW MYSELF TO GET RIPPED-OFF AND HAVE ABSOLUTELY NO POWER WHATSOEVER TO STOP IT.

Enough truly is enough.

Leaving on a Rutan Long-EZ plane?

[Thaddeus]

Hang on a sec.

The headline is scary, inferring that there is going to be an inflation spike across the board, and then it bangs on about car manufacturers.

And then a little snippet in the middle.......

The good news is that prices of consumer goods should not move much.

Aren't all goods consumer goods?

I think they meant local quickies as in food and non export items.

Yes GK, that was rather the point I was making, and the basic problem I have with the article, yet again it's another "the sky is falling, the sky is falling" piece of work.

[1bbcd5]

Great thread! Also my favorite view.

[Ijustwannateach]

Well, Chok Dee, JohnDenver.... if your real friends are at home, I agree, you should be there.

[Amras]

Wow JohnDenver, bitter about something. The fact that your dollar is worthless, so blame Thailand right? It's amazing how many people turn around blame Thailands economic stability for the shittiness of their home currency. The Aus economy is still fine and the Aus to THB is as good as it used to be when the Baht, US was lower. The problem is with your US dollar. Stop whining about the Thai baht.

Supply and demand happens the world over. When supply goes down, due to a natural disaster, demand is the same, causes an increase in costs. Some of you seem to have been living in Thailand too long, you forget a lot of the world works exactly the same. Eg, flooding in Qld Aus, took out a huge proporion of the banana plantations, the result bananas went up 300% per kg!. yes it was crazy, but its economics.

Stop your complaining and if you are truly that unhappy then go back home.

I get tired of people complaining about Thailand, because they just want to complain about Thailand. Like the first reply, that Thailand only thinks about money. Tell me a country in the world where people DON'T WANT TO MAKE AS MUCH MONEY AS THEY CAN IN ANY SITUATION?????

Yes there are some things that should be complained about, but most of the same things you can say for nearly every country around the world.

Get off your high horse and stop whining.

[scotto]

Sorry to hear johndenver feels that way i hope he finds it better in his home country.

[RogueLeader]

HAVE ABSOLUTELY NO POWER WHATSOEVER TO STOP IT.

Enough truly is enough.

The fundamental, inescapable reality behind the existence every farang resident of Thailand. Everyone realises it sooner or later.

[mikebike]

Hey Johnny Denver... Your rant applies to the U.S. and other farked up western economies more than anywhere else in the world... Good luck elsewhere!

[paulswebb]

Well a bottle of Leo has gone up 3 baht in the last weeek, hows that for stqrters, and I am in Chom Bury.

[senti]

Seeing events in the past couple of months, and many other "events" before that, made me finally realize that there is simply no reason for ME, PERSONALLY, to stay here, not the least of which is because if I am going to have to basically pay the same prices--AND HIGHER--for goods that I can get back in America, this is literal INSANITY FOR ME TO CONTINUE TO STAY HERE AND KNOWINGLY ALLOW MYSELF TO GET RIPPED-OFF AND HAVE ABSOLUTELY NO POWER WHATSOEVER TO STOP IT.

I am confused.

Did someone hold a gun to your head and ordered/forced you to live in Thailand?

[adamokeefe]

Hey Johnny Denver... Your rant applies to the U.S. and other farked up western economies more than anywhere else in the world... Good luck elsewhere!

I'm just wondering what power he thinks he has back home - wherever that is.

I don't feel I could change the way of life here any more than I could in the UK, so what's the difference?? Just because I can vote in the UK doesn't mean I can do what I like. I still have to obey the rules and laws whether I like them or not. You think democracy is any swifter to change there than here? You think there's no corruption in the 'West'? You think business dont think money first, people second?

Seemed like a needless rant, more of a release of pressure / stress and getting something off his chest.

I hope it helped, but please don't try to tell me where I should be living and what choices I should be making.

[anterian]

traders taking advantage of the fact that demand is high while supply is low. Inevitable and already happening. Just watch the price of Thai whisky go through the roof once everyone gets their 5000 Baht from the government.

[ignis]

The prices of ALMOST EVERYTHING is going to increase

There going to ingress ? I went down south after ordered out by the Army 3 weeks ago, now driving back, been into a number of places like Makro, Big C, Tesco, there out of many items, just bought bag of Rice from Tesco Lotus, in this Town Makro had non, Rice normal price is around 194 - 8 baht, just now 132 baht !!!! again water only a few bottles left 35 baht for 1.5 lt !!! bought the rice but not the water as found some a few km before in a little Village shop @ 14 baht.

[Jerry555]

So when the water goes up , prices rise .

When the water goes down , prices rise .

[HardenedSoul]

MARK MY WORDS:

The baht is ridiculously high, and has been for quite a while now, BUT THE COSTS OF PRODUCTS, ESPECIALLY PROCESSED-FOODS LIKE BREADS HAS INCREASED!!! You people who are going to make excuses for the theft of your money via over-charging need to get-with-the-program and demand that it stop, and the very best way that I know to do it is to get my affairs in-order and go back home where I DO HAVE A SAY IN HOW MY COUNTRY IS RUN/MANIPULATED. I have seen too much for far too long here, and I really don't give two $$$*$ if the door hits me in my tail on the way-out...just as long as I am out while the getting-is-good.

Seeing events in the past couple of months, and many other "events" before that, made me finally realize that there is simply no reason for ME, PERSONALLY, to stay here, not the least of which is because if I am going to have to basically pay the same prices--AND HIGHER--for goods that I can get back in America, this is literal INSANITY FOR ME TO CONTINUE TO STAY HERE AND KNOWINGLY ALLOW MYSELF TO GET RIPPED-OFF AND HAVE ABSOLUTELY NO POWER WHATSOEVER TO STOP IT.

Enough truly is enough.

I could understand if you'd identified cold, hard economics as your reason for leaving but I'm afraid you just sound bitter. You're out of your mind if you think that you can exert any influence over rising prices in the US beyond taking your business down the street.

The baht isn't strong; the dollar, the pound and the euro are weak and this is to be expected in emerging market economies that consistently run surpluses against countries, like America, that are heavily-indebted and that also pursue kamikaze monetary policies like quantitative easing that drive up the cost of commodities like the grains that go towards making the breads you're obviously fond of.

There's little point bitching about prices in Thailand cos however much it's hurting you, it's probably killing ordinary Thais who, let's not forget,KNOW how to stretch a baht.

Oh and by the way, I wouldn't over-estimate the power of your vote if you're a Republican. With clowns like Rick Perry vying for nomination, you may very well be disappointed come November 2012.

[maidu]

The op didnt' mention real estate, but one would assume prices for real estate would go down. However, in the 'up is down' weird world of BKK, I woudn't be surprised if real estate prices go up.

Prices for rentals should go up.

[lounger]

Well a bottle of Leo has gone up 3 baht in the last weeek, hows that for stqrters, and I am in Chom Bury.

The market forces normally apply so that prices rise until someone comes in and undercuts. Once price deflation starts then things stabilise. Unfortunately the Thai system is mainly to copy and thereby ring the market. Many small businesses (!) price to match their needs so if the customer base falls away they put up the prices to ensure a consistent income. Again this can only continue until someone breaks the trend and cuts prices. If the market can support the prices then they will not come down.

People who complain about prices should be the ones who should try running a business and see if they can survive on the absurdly low profit margins. In restaurants near me the beer mark up is 10 baht per bottle. They need to sell 30 bottles just to pay one member of staff. A business unit in Phuket cost 60,000baht, one rollerdoor, per month last time I asked.

Edited November 14, 2011 by lounger

[tonglen]

'I DO HAVE A SAY IN HOW MY COUNTRY IS RUN/MANIPULATED. '

We all have a "say" in how every country is ran, but this one is no different from other countries.

Sorry to burst your bubble but, you can have a say but the politicians are NOT LISTENING.

I hope you find your political Shangri-La, your City of Eldorado, but I think youll find politics/economics are the same worldwide.

Good luck and safe journies.

[Gweiloman]

MARK MY WORDS:

The prices of ALMOST EVERYTHING is going to increase, especially food-stuffs like rice and meats, and the "excuse" is going to be the floods. Anything, anything at all, to be found as excusable to gouge the people will be found. I guarantee it.

I won't be here to say, "I told you so." Just get yourself prepared for how you are going to feel when you are shafted once again by those who charge what they want and then steal more money from imports by-way of "customs-fees", etc. The only reason that any of this is happening across the world is BECAUSE "THE PEOPLE" ARE ALLOWING IT TO HAPPEN TO THEM. It is in-excusable, and it is despicable. If you let someone steal a little from you now and you DON'T SAY ANYTHING, the same corporate AND non-corporate opportunists/thieves will just keep pushing to see how much higher they can push it until they hear a moan.

I am not going to let this go...

The baht is ridiculously high, and has been for quite a while now, BUT THE COSTS OF PRODUCTS, ESPECIALLY PROCESSED-FOODS LIKE BREADS HAS INCREASED!!! You people who are going to make excuses for the theft of your money via over-charging need to get-with-the-program and demand that it stop, and the very best way that I know to do it is to get my affairs in-order and go back home where I DO HAVE A SAY IN HOW MY COUNTRY IS RUN/MANIPULATED. I have seen too much for far too long here, and I really don't give two $$*$ if the door hits me in my tail on the way-out...just as long as I am out while the getting-is-good.

Enough is enough, and this TRULY WAS/IS THE LAST STRAW. We, as "ex-pats" or whatever the Hell other label is to be used for us Americans/Westerners living in this country need to finally realize that we have to take-care of our OWN COUNTRIES FIRST--get things in our own communities and families working-well--before we can even BEGIN to deal with anything here in Thailand. I know that this is a painful reality for most of you to realize, but you people really MUST face-reality and understand that even if we came here with the very best intentions to make things better where we taught/worked and lived in our community(ies) here in Thailand, this disaster and the manipulated financial collapses occurring across the planet are a HUGE wake-up call for us to get our priorities in-order once and for all because when all is said and done, very serious problems are going to occur everywhere on the planet, and I PERSONALLY want to be in my own nation, trying to take-care of my OWN community where my family and true-friends are.

Seeing events in the past couple of months, and many other "events" before that, made me finally realize that there is simply no reason for ME, PERSONALLY, to stay here, not the least of which is because if I am going to have to basically pay the same prices--AND HIGHER--for goods that I can get back in America, this is literal INSANITY FOR ME TO CONTINUE TO STAY HERE AND KNOWINGLY ALLOW MYSELF TO GET RIPPED-OFF AND HAVE ABSOLUTELY NO POWER WHATSOEVER TO STOP IT.

Enough truly is enough.

Take a few posters on this forum with you. You can all enjoy being bitter together

[elcent]

@JohnDenver

I understand your grief and most likely a social unrest will be coming soon. After the water comes the heat - literally.

Ron Paul needs you there right now, the only hope for America and the world.

To all others, at least he realized that this is most likely about land-grabbing and their system lets the corporate mafia be at the front to hide their real aim.