There are only a few days left until the end of 2019, and the unstable state of Iran’s economy continues to create a sense of social insecurity and anxiety in the business environment, placing economic forecasts at high importance. Problems related to sanctions and lack of liquidity in companies continue, and companies and production units are considering the fact that sanctions will not be lifted in the short and medium term when drawing up their strategies. Forecasting is the process of estimating unknown situations. But the important point is that, as in the past, Iran’s economy cannot be predicted next year. Previously, when we wanted to make predictions about Iran’s economy, we would turn to economists, and they would predict the future state of the economy based on economic models, but currently, due to political reasons and sanctions, models are less effective and more scenarios have to be developed.
The importance of the sandwich panel manufacturing industry as an intermediary industry that actually provides services to various sectors of production and industry in the country is that its conditions can in a way indicate the level of economic prosperity in various sectors of the industry. In the cold storage sector, it provides services to the fruit industry and its exports. It is used in the fisheries and poultry industries as a cold storage coating, and in other industries as an industrial coating for the roof and walls of sheds. Therefore, as there is prosperity in various sectors of the industry, the sandwich panel industry will also prosper. For this reason, it can be claimed that predicting the conditions of the sandwich panel market will be a kind of outlook for the prosperity of the Iranian economy in the coming year. To predict sandwich panel market scenarios, it is necessary to examine the factors affecting this industry. The budget and its importance and impact on market prosperity, inflation and its role in the market conditions of raw materials, including various types of sheets and petrochemicals that make up foam sandwich panels, as well as the conditions of the human resources active in this field, are among the most important factors affecting the conditions of this industry.
In the consumer sheet sector, the market is growing in a strange way and is in a state of uncertainty. The latest supply price of galvanized sheet was announced at 13,500 Tomans per kilo, which, after calculating the value-added tax and other incremental items (premium) for delivery in June next year, has reached a figure of about 16,500 Tomans in the market. Expectations from the 2019 budget are very high, as on the one hand, there is an expectation that the government will be able to support vulnerable groups, and on the other hand, economic enterprises are also looking to the government to save themselves from bankruptcy by using government facilities. In the development budget, this year’s appropriation is about 67 trillion tomans, while in the 2010 budget bill, development appropriations have reached about 70 trillion tomans. This statistic shows that the relevant appropriations have increased by about 5 percent next year. But the noteworthy point in this section is that according to the annual price increase cycle in budget bills in proportion to inflation and other indicators, development credits in 2018 should have increased by 19 percent, but in the 2018 budget bill, credits increased by 5 percent, which indicates a 14 percent difference in the process of increasing credits. Also, the 2019 development budget has decreased by about 14 percent compared to the 2018 development credits, and based on statistics provided by the Planning Organization, the country’s total budget will be collected at about 385 trillion tomans from the beginning of this year until March, which indicates a decrease of 60 trillion tomans in the credits collected. Unfortunately, this lack of credit collection this year has been deducted from the credit lines of the construction sector and has led to a 50 percent reduction in construction credits in 2019, which have actually been transferred to other lines. A repetition of this scenario is foreseeable next year, given the sanctions on oil sales and the lack of oil revenues. With this in mind, we cannot expect government projects and allocation of budgets in various forms to the private sector next year.
In the consumer sheet sector, the market is growing in a strange way and is in a state of uncertainty. The latest supply price of galvanized sheet was announced at 13,500 Tomans per kilo, which, after calculating the value-added tax and other incremental items (premium) for delivery in June next year, has reached a figure of about 16,500 Tomans in the market. There are various reasons for this price increase, but it is important to mention why sheet metal has increased more than other steel items. Factors such as the increase in the exchange rate, shortage of raw materials, reduced factory production due to a drop in gas pressure, and other factors have contributed to the price increase. However, the market’s reasonable expectation is that the price will increase at the same rate as other commodities. Unfortunately, the situation has turned out differently, and sheet metal has increased by about twice as much as rebar. So in reality, the reason for this excessive increase in sheet metal, in addition to the shortage of ingots and slabs, is another issue, such as the monopoly of sheet metal producers. That is, with a simple comparison, we can see that we have much fewer producers for sheet metal compared to rebar; this has allowed the producer to sell its product to the market with minimal competition at its declared rate. However, predicting this volatile market seems very complicated and in fact impossible, but what can definitely be expected is a 25 to 30 percent increase in price compared to the January price.
In the petrochemical sector, prices have increased due to the rising price of petrochemical raw materials in recent weeks and the restrictions imposed. For example, the price of polymer isocyanate produced by Karun Petrochemical Company has experienced a 16 percent increase since mid-January. Also, due to the problems that have arisen in the money transfer process, it is expected that the import of raw materials for the production of polyurethane, which is used in the production of sandwich panels, will also face problems, which will certainly affect the price of this product.
In the human resources sector, the Planning and Budget Organization has predicted a 15% increase in workers’ wages next year, while this figure is very small and cannot compensate for the increase in prices for the working community. However, it is expected that the minimum wage will increase by 20 to 25 percent for the new year, which is actually part of the expected inflation for next year.
In the context of current inflation next year, if the growth of the monetary base is not controlled, it will lead to an increase in liquidity and, given the negative economic growth, it will lead to very high inflation. On average, in the last 4 decades, the country’s liquidity has grown by 27 percent annually, and this increase in liquidity, along with high inflation, will affect the entire economy.
While we have experienced inflation of more than 40 percent this year, considering all the factors mentioned, we can predict that the situation will be similar next year and we should expect inflation of 30 percent.
The meaning of all the above points to the fact that, for example, for cold storage sandwich panels with a sheet diameter of 0.5 mm and a thickness of 10 cm with a density of 40 kg/m3, which are currently sold at an average price of 200,000 Tomans per square meter, an increase of 30 to 40,000 Tomans, or equivalent to about 20%, is on the way. These conditions will definitely reduce the volume of the sandwich panel consumption market and make the market more competitive.
The final conclusion is that in any case, we should wait and prepare ourselves for the complicated conditions of next year. In the corporate sector, Iran’s economy will definitely become at least five percent more competitive next year, and for this reason, companies must compensate for at least five percent of the increase in production costs caused by inflation by improving productivity. The only way to compensate for this increase in costs is to improve productivity. Companies should not pass on all cost increases to end consumers of goods, as this will reduce purchasing power and shrink the market. Low-efficiency production units are the biggest losers in the country’s new economic conditions, and proper budgeting and cash flow control are the most important factors in overcoming the upcoming crises. In the consumer sector, given the increase in prices, a decrease in purchasing power is very likely. It seems that the best way to overcome these conditions is to have a targeted plan that allows you to make the right decision very quickly in times of need to achieve the best results.
Mohammad Hassan Shah Mohammad– DBAMarketing and Branding
Sales Management of Parsin Gostar South Company
