CHINA'S two major appliance retailers announced plans to battle rising costs of materials, such as copper and steel, this year because they see this as an urgent task.
"The combined price of the two materials have risen about eight percent this year," Suning Appliance Co Ltd, the country's second-largest appliance retailer, said in its annual white book.
Copper and steel are largely used in the making of white goods such as air conditioners and refrigerators.
The Nanjing-based company said it will boost its purchase volume of middle and high-end air conditioners to secure a stable price. It has bought one million air conditioners since the Spring Festival in early February, according to the white book.
"Buying the air conditioners in bulk is our key strategy to control prices before the May Day holiday," said Sun Weimin, Suning's president.
Cheng Fei, general manager of Suning's air-conditioner department, said retailers should work together to tackle rising prices and said the rise in air-conditioner prices can be limited to between eight to 10 percent this year.
Gome Electrical Appliance Holdings Ltd, the market leader, said it will work with producers to optimize the supply chain to digest rising labor and material costs.
Gome will cooperate with 50 appliance companies, including Haier, Samsung and Sony, to control the price.
A Gome official has predicted that prices of white goods will rise one percent to six percent in the first half of this year, while black appliances, such as television, will fall 20 percent to 30 percent.
Price hike
However, some companies have announced a price hike following in the footsteps of Siemens, which said before the Spring Festival that it would raise the prices of refrigerators, washing machines and kitchen appliances by about five percent.
The Haier Group, which has a 7.98-percent share of the domestic air-conditioner market and 29.46 percent share of the washing machine market, has also announced a mark-up on speculation that rising iron-ore prices will further stimulate steel prices.
Baoshan Iron & Steel Co, the country's biggest steel maker, said last month that it would raise prices of steel products in the second quarter by up to 20 percent after iron ore prices jumped.
Baosteel follows rivals in Japan, where mills such as Nippon Steel Corp, Asia's largest by output, have also announced price rises after agreeing to pay 65 percent more for iron-ore prices this year, raised product prices.
The Producer Price Index, the main gauge of factory-gate inflation, jumped 6.6 percent last month from a year earlier in China, the highest since a 7.1-percent hike recorded in December 2004. Steel costs gained 18.9 percent during the period.
Meanwhile, inflation rose 8.7 percent last month, the highest in more than 11 years.
Companies also said that besides materials, the implementation of a new "Labor Contract Law" is increasing wage costs for them.
They also saw their transport costs climb because of soaring oil prices. Crude oil on Tuesday rose 0.8 percent to settle at a record close of US$108.75 a barrel in New York, having earlier surged to an intraday high of US$109.72 a barrel.
"The production capacity in the domestic appliance industry outpaced the demand, so manufacturers may not raise the price sharply in a competitive market," said Han Jianhua, secretary of Shanghai Commercial Trade Association of Household Electric and Electronic Appliances. Qi Xiaozhai, director of Shanghai Commercial Economic Research Center, said even with high prices, consumers have a choice as they can turn to lower-priced brands.