Bottled Water Industry Faces Capital, Packaging Shortages

EghtesadOnline: Stagnation afflicts bottled and mineral water industry due to problems of procuring packaging material and 30% to 40% of the country’s related businesses are on the brink of closing down, the secretary of Mineral and Potable Water Producers Association said.

News ID: ۷۸۳۷۱۳

18 August 2018

Peyman Forouhar also said the industry has been struggling with high polyethylene terephthalate (PET) prices, which have experienced a fourfold to sixfold increase since the beginning of the current Iranian year (March 21).

“We cannot increase the prices of products due to the reduced purchasing powers of customers, nor can we make changes in the quality of our products. On the other hand, shortage of capital is a problem for production units that have to pay for their petrochemical raw material purchases in cash. Most of the smaller companies are incapable of doing this. As a result, the bottled water industry is facing a crisis,” Forouhar told the news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture.

The recent crisis facing the petrochemical market is the result of middlemen rushing to make a quick buck, according to Financial Tribune.

Following volatility in forex markets, petrochemical markets have been in turmoil, particularly concerning PET, which is the raw material used in the production of water bottles, as well as oil and food containers.

According to IRNA, not only is the material gaining in value every day, but it is also in very short supply.

The shortage in the supply of PET, which added to the rise in price, has forced some companies to reduce their output. However, some PET producers dismiss claims of underproduction.

Studies show that both the groups are in the right and that the main problem is posed by profiteers who are exploiting the current situation and violating the rights of consumers by buying raw materials cheap and hoarding them or selling them to neighboring countries.

After the US government pulled out of the Iran nuclear deal, the surge in forex rates made the Iranian government turn to command economy policies, setting a fixed rate for the dollar at a much lower price than that of the open market.

It then allocated US dollars and euros at the unified rate of 42,000 rials to a dollar to individuals and companies of choice. The allocations, however, caused corruption and led to the creation of a forex black market.

Later, the Secondary Forex Market was set up as a solution to the volatility caused by the set dollar price, where money changes hands at a price negotiated and agreed upon by the seller and buyer (closer to the black market rate than the government-issued one).

The secondary market does not seem to have stopped the profiteers, as they are buying raw materials from the producer and smuggling them out instead of supplying them to domestic companies that use the raw materials in production.