It is easy to talk about armchair theories, but 🥊 the front lines are a serious battle! 😱 Thoughts on the Month for Promoting Price Negotiations 💭 No matter how hard I work, no matter how hard I work, my life does not get any easier. I stare at my hands 🖐
Hello everyone, I am Pikaichi, the 'Rug Master' (boss of a rag house). A rag house is a recycling factory for used clothing. Thank you for your daily cooperation in recycling and collecting used clothing!!
This time, I would like to share the Rug Master's opinion on the Month for Promoting Price Negotiations.
I would like to state from the beginning that this is not the consensus of the industry or the association; please read this with the understanding that it is purely my own personal view as the Rug Master.
🟢 Request for notification regarding the implementation of the Month for Promoting Price Negotiations
The other day, a request was sent from the Ministry of Economy, Trade and Industry to the rag house association regarding the notification of the implementation of the 'Month for Promoting Price Negotiations' in March 2024.
To summarize briefly, it means that in order to raise the wages paid to employees in the manufacturing sector, ordering companies should pass on price increases, such as those caused by inflation, and encourage appropriate price hikes for products from their suppliers.
It is easy to express in words, but actual negotiations do not go that easily. Let's consider the example of reclaimed fiber raw materials, which is one of the products handled by our rag house industry.
🟢 Flow of reclaimed fiber raw materials
First, let's look at the supply chain diagram for reclaimed fiber raw materials.
10-20% of the used clothing sorted at a rag house becomes reclaimed fiber raw material, which is shipped to a felt factory and processed into felt. After that, it is processed into parts by Tier 1 company parts manufacturers (Note 1) and delivered to automobile companies. [The arrow pointing toward the Earth represents exported used clothing]
Note 1: 'Tier 1' means a primary contractor; in the automotive industry, it refers to manufacturers that supply parts directly to finished vehicle manufacturers. Companies that supply parts to Tier 1 manufacturers are called Tier 2. We rag houses are at best Tier 3, but because the reclaimed felt manufacturers are complexly intertwined, we are sometimes Tier 4 or Tier 5.
🟢 Supply and demand situation for reclaimed fiber raw materials from 2020 to 2022
Demand for reclaimed fiber raw materials plummeted due to production cuts in automobiles caused by the COVID-19 pandemic and semiconductor shortages. Surplus sweaters and the like were exported as used clothing, but it seems some were incinerated.
🟢 Current supply and demand situation for reclaimed fiber raw materials (as of January 2024)
As automobile production has increased, demand for reclaimed fiber raw materials has naturally increased, but due to the weak yen, export demand is also strong.
And the current export price for sweaters is 25 yen (Note 2), while reclaimed fiber raw material is 10 yen. However, reclaimed fiber raw material costs 7 yen for shipping to Okazaki, Aichi Prefecture, so it is effectively 3 yen, a difference of 22 yen.
Note 2: This amount is based on our own research, and there may be discrepancies with actual market prices.
Do you think there are any companies that would dare to sell at the lower unit price of reclaimed fiber raw materials during this period when management conditions are deteriorating due to soaring prices of various goods? Naturally, most of it is exported, and a state of shortage of reclaimed fiber raw materials continues today.
🟢 What will happen to price negotiations for reclaimed fiber raw materials?
The party we negotiate prices with as a rag house is the felt factory, but it seems that price negotiations between that felt factory and the Tier 1 companies further down the line are not progressing. I don't even know if those Tier 1 companies are negotiating price hikes with the automobile companies; it's all happening above the clouds.
In the midst of this, it is said that a felt manufacturer coincidentally sent a request for negotiations regarding an increase in the production of shoddy raw materials to a major rag house. The rag house reportedly jumped at the chance and headed to the felt manufacturer.
They spent two hours explaining the background, such as high export prices and soaring prices of various goods, and then requested a price increase for the shoddy raw materials.
The result? It seems the felt manufacturer said, 'We don't want to be disliked by the major companies, so we cannot raise the price.'
Is it appropriate in this day and age to ask a small rag house to increase production of a money-losing product without a price increase? When I hear about cases like this among peers who are in a serious knockdown fight, what the politicians in this country are doing is just performance.
Click here for the magazine 📖 Rag Master Pikaichi's opinion ▼
Click here for the YouTube video: Speaking out to automakers 📢 Demanding a price increase for felt made from used clothing ❗ 🔛
🟣 What is a Rag House? 🟣
A rag house is a recycling factory for used clothing, known in Japanese as 'boroya' (rag shop). At a rag house, collected used clothing is sorted and recycled mainly for the following three purposes:
① Raw material for wiping rags (industrial rags)
② Raw material for shoddy (raw material for felt)
③ Used clothing (for domestic and overseas markets)
▼ Click here for Rag House TV's YouTube videos!
▼ Click here for the Used Clothing and SDGs homepage!
▼ Click here for the Used Clothing and SDGs Facebook page!
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