After the Middle East crisis, the supplier says it will raise raw material prices by 30%.
On the 25th in Yeongdeungpo District, Seoul, at a banner company. In a factory of a little over 50 pyeong, there were 10 machines that make banners. But only two were running.
An employee, a person surnamed Cho (40), kept sighing at the supplier's price hike notice. Cho said, "With high inflation and a strong dollar, raw material prices have been steadily rising since two years ago, but it's the first time they've jumped this much."
◇ "Material costs are rising, but it's hard to raise prices"
As the Middle East crisis drags on, its ripple effects are reaching the banner industry. Prices for materials and supplies have jumped, but competition is preventing companies from raising banner production costs, leaving them to shoulder the expense. If this continues, some even say it may be hard to see banners during the 9th nationwide local elections held simultaneously (June 3 local elections).
According to the industry on the 26th, banner companies have recently been receiving back-to-back notices of increases in supply prices for materials. A person surnamed Kim (48), who runs a banner company in Jung District, Seoul, said, "A middleman that supplies raw materials contacted us to say it would raise prices by 15%," adding, "Orders are few, and only material costs are rising, so it's really daunting."
As with the recent stockpiling of garbage bags, a tight supply of naphtha is the cause. Banners are made from polyester fabric synthesized from basic fractions (such as ethylene) derived from naphtha, along with dyes.
With the Strait of Hormuz, through which about 54% of Korea's imported naphtha passes, blocked, naphtha supply has declined. As of the previous day, the international naphtha price broke above $1,000 per ton (t), jumping 1.5 times in three weeks. That's why prices of naphtha-based feedstocks are rising across the board.
A person surnamed Park (52), who owns a banner company in Jung District, Seoul, also said the price of polyester fabric has risen by more than 15% since the war. The problem is that, amid competition with large companies, it is not possible to raise prices.
Park said, "If we raise prices, we're afraid customers will leave, so we can't easily increase them," adding, "Competition has intensified as more large companies use Chinese raw materials and hire foreign workers."
◇ Worried about missing the "election effect," the peak season for banners
Another variable is that elections, considered the "peak season" for the banner industry, are approaching. If banner orders surge temporarily, shortages of raw materials could worsen.
Candidates usually replace their banners three times during the campaign period and place one more order for a banner to thank voters after winning or losing, for a total of four orders. Under the Public Official Election Act, banners can be installed up to twice the number of towns, townships, and neighborhoods in the district.
If there are five towns, townships, and neighborhoods, one candidate can post 40 campaign banners. It is known that about 140,000 banners were produced in the last local elections.
An official at the Korea Federation of Textile Industries said, "We are stockpiling three months' worth of banner fabric and six weeks' worth of production materials that can be supplied to the market," but added, "To prepare for the surge in banner demand during the election period, we are considering importing from abroad or recycling banner textiles."