Cheaper oil, steel un­likely to lead to low con­sumer goods prices

Hindustan Times (Lucknow) - - HT BUSINESS - HT Cor­re­spon­dent ■ let­ters@hin­dus­tan­times.com

Prices of con­sumer goods such as cars, wash­ing ma­chines, soaps and sham­poos may not fall sharply in the com­ing days fol­low­ing the re­cent drop in in­put costs, but com­pa­nies will use the pre­vail­ing soft price regime to push pro­mo­tional schemes and gain mar­ket share.

Crude oil, which ac­counts for a ma­jor part of the pro­duc­tion and freight costs of most goods, fell sharply in global mar­kets to $81-82 a bar­rel, as West Asi­abased oil-pro­duc­ing coun­tries said they may have to re­duce ship­ments to the US, one of the world’s largest con­sumers. The price of the com­mod­ity has eroded sharply since Novem­ber 2001, and is likely to fall fur­ther.

The drop in oil prices has al­ready pushed down In­dia’s in­fla- tion rates, with the con­sumer price in­dex-based or re­tail in­fla­tion — an in­di­ca­tor of shop-end prices — grow­ing at 6.46% in Septem­ber, the low­est in three years.

This has soft­ened prices of palm oil, a key raw ma­te­rial used for mak­ing soaps and other daily con­sumer items. Hin­dus­tan Unilever, In­dia’s largest fast-mov­ing con­sumer goods company and a mar­ket leader in toi­let soaps, ex­pects ben­e­fits to build slowly.

“From the costs per­spec­tive we should start to see ben­e­fits of fall­ing com­mod­ity prices in the com­ing quarters,” chief fi­nan­cial of­fi­cer PB Balaji said.

A sim­i­lar stance has been adopted by steel com­pa­nies who make and sell con­sumer grade or flat steel. The metal is used for mak­ing cars and con­sumer goods such as wash­ing ma­chines and re­frig­er­a­tors.

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