On October 15, 2021, at 20:16 JST, Kenji Kawase, the chief business news correspondent for Nikkei Asia, reported from Tokyo that Chinese goods producers are grappling with soaring input costs. This unprecedented growth in costs is making it difficult for manufacturers big and small, all over this great country. Amidst these challenges, a wave of profit updates from resource producers indicates a significant financial opportunity that could reshape the industry’s landscape.
With the sharp increase in input costs, many Chinese producers have been caught between a rock and a hard place. They are left to make do in an environment addicted to increased costs and pressure to deliver earnings growth. As these companies continue to chart a path through this rocky landscape, our producers are fighting hard to shine a light on their bright future. They have every intention of profiting on a new, huge windfall associated with the current commodity squeeze.
The biggest beneficiaries are coal miners. Their profits are projected to increase threefold thanks to the massive spike in the market for oil. This unprecedented spike in profitability is historic. Most importantly, it makes for an acute contrast with the headwinds that nearly every other sector of the economy is facing right now. Increased global demand for coal is causing the expected earnings spike. This recent spike has been due to a combination of factors such as energy crises and rising demand.
Many independent industry analysts warn that this increasing coordination will further entrench and concentrate power in the growing resource sector. In addition, coal prices remain very high. This means that more companies can feasibly make investments in extraction and production capabilities that may greatly enhance their earning potential. This shift may prompt discussions around energy policy and sustainability within China, as authorities balance economic growth with environmental concerns.
Moreover, the knock-on impacts of these profit boosts may reach far beyond the resource producing regions. Both the transportation and logistics industries are getting ready for a boom. As interest in coal and other commodities rises, these industries will be handsomely rewarded with new business. In many ways, this duality of promise and peril characterizes the current moment and the tenuous balance between economic opportunity and environmental episode.
Resource producers are basking in an expected boom of long anticipated profits. Meanwhile, manufacturers that rely on these resources are still struggling from increasing input costs. The potential for higher prices on consumer goods may affect inflation rates and the purchasing power of consumers within China.