- Blue Star may need further price hikes due to rising raw material and logistics costs
- The company raised prices by 8%, but an 18-19% increase was needed over the year
- Copper, aluminium, steel, and HDPE prices have surged significantly in the past year
Blue Star Ltd may need to raise product prices further as rising raw material and logistics costs continue to squeeze margins, Managing Director B Thiagarajan told NDTV Profit.
Thiagarajan said the company's latest 8% price increase will not be enough to fully offset the cost escalation. According to him, Blue Star should have raised prices by around 18-19% over the past year, leaving a gap even after the latest hike.
Copper, aluminium, steel and high-density polyethylene prices have all risen sharply over the past year, while ocean freight and domestic transportation costs have also increased, he said.
Raw Material Costs Rise Sharply
Thiagarajan said copper prices have risen 41% to $14,450 from $10,233 a year ago, while aluminium prices have increased around 21% to $3,250 per metric tonne from $2,672.
Steel prices have risen to Rs 64,000 from Rs 49,200, while HDP used in injection-moulded plastic has increased to Rs 134 per kg from Rs 91.
Blue Star had discussed a 13% price increase during the summer season, but only around 5% could be passed on, leaving an 8% gap, he said. With the latest 8% increase, the company would still have around a 5% gap if the hike is fully absorbed by the market.
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Demand A Key Concern
Thiagarajan said margins are already under pressure after the company's margins declined sharply in the June quarter. However, passing on the entire cost increase could also affect consumer demand.
He said the 10% GST reduction has provided some relief, with the effective burden on consumers limited to around 5% if overall prices rise 13% to 15% after the latest hike.
Thiagarajan added that Blue Star is also watching developments in West Asia, which could influence freight costs and overall price volatility.
He said the company's approach remains to pass on cost increases and return the benefit to consumers when costs decline.
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