On January 26, 2021, the electric tower can be seen in front of the cooling tower of the German energy giant RWE’s coal-fired power station in Weissweiler, western Germany.
Ina Fassbender | AFP | Getty Images
A management consultant said on Wednesday that rising energy prices will increase business costs and profit margins for global companies.
With supply still tight and demand rebounding from the slowdown caused by Covid, the prices of energy commodities (including oil, natural gas, and coal) have soared in recent weeks. This has led to shortages of electricity and fuel from Europe to Asia.
“This is a big problem for companies. It will shrink their profit margins because as their input costs rise, the question is how quickly they can increase their prices,” Richard Martin, managing director of IMA Asia, told CNBC. ” Squawk Box Asia” .”
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India and China may be at risk
Martin said that because of the “very active” consumer market, American companies have a better chance of protecting their profit margins, adding that this will allow them to quickly increase sales prices.
But the consultant said that people in other countries face a tougher outlook.
“In many countries in the world, we don’t have such an active consumer market. China is one of them. In fact, many East Asia are in that region. As costs rise, profit margins fall,” said Martin.
India is also at risk. Martin pointed out that the Indian stock market has been rising, but this South Asian country will find it difficult to pass the cost on to consumers.
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