Rough Patch

It’s getting real ugly out there now. Formosa Taffeta is going to increase its textile price again, effctive February, 2011. The increase runs roughly USD$0.05.

For those of you who are not familiar with the textile industry in Taiwan, Formosa Taffeta is like the top dog of the industry. When it announces an increase in price, almost every, company, factory or mill in Taiwan is going to do the same.

It is the third time since last October. If we add that up to the pervious ones, it’s a total of USD$0.15 increase over the past six months.

What’s even worse is that I heard the company intends to increase it again in the near future.

Com’on, stop with the price increase already! L

Let me try to explain how bad the situation is in simple mathematical terms,

If I were to sell an article that costs $33 NT dollars a yard, using unrealistic quotation formula, it would look something like this six month ago,

$33 (cost in NTD) / $33 (USD exchange rate) = $1 (cost in USD)

$1 / 0.98 (2% markup) = $1.02 (quotation price)

Let’s kick in the exchange rate here:

$33 (cost in NTD) / $29 (USD exchange rate) = $1.14 (cost in USD)

$1.14 / 0.98 (2% markup) = $1.16 (quotation price)

Now, after the cost has been increased:

$37.50 (cost in NTD) / $29 (USD exchange rate) = $1.29 (cost in USD)

$1.29 / 0.98 (2% markup) = $1.32 (quotation price)

From USD$1.02/y to USD$1.32/y, the difference is significant and shocking. You can pretty much imagine the conversation will be like the next time you call or email me for price quotation.

Anyway, my point is that none of this extra margin goes into my pocket. The raw material cost and foreign exchange rate obviously played the big roles in this. As the situation gets too hot to handle, I wonder how many textile companies in Taiwan can survive through this.

So, seriously, stop with the price increase already, I haven't found a new job yet!!!