Q1. Could you start by giving us a brief overview of your professional background, particularly focusing on your expertise in the industry?

I am a mechanical engineer with over thirty years of experience across production, supply chain management, vendor development, procurement, and integrated solutions. My core areas of expertise include vendor development, price negotiations, global sourcing, and strategic material procurement and planning.

Q2. What emerging risk or opportunities do you anticipate from shifts in energy prices and global trade dynamics affecting procurement? Can you share some examples?

For example, the recent energy price hike due to disruptions in the Middle East will directly affect logistics costs. This, in turn, indirectly affects the cost of imported raw materials. Such disruptions can also lead to shortages in logistics fleets, resulting in shipment delays. Blank sailings across various ports have become more common. For instance, I recently managed a consignment from China that took approximately 75 days to reach India, compared to the usual 30 days. The primary reason cited was the unavailability of shipping fleets due to sudden fluctuations in energy prices, which led to blank sailings and reduced vessel operations. These are practical challenges we have faced, as confirmed by our logistics partners. Procurement is closely linked to both international and domestic logistics. While there may not always be a decrease in prices, delays and increased costs are common due to these disruptions.

We are also experiencing shortages in vehicle availability in the domestic market. For example, when diesel prices rise, there are often surges in transportation costs and reduced fleet availability. These challenges are further amplified during festival seasons. For instance, during Diwali, transporters had notified us of increased prices due to limited vehicle availability. Such vehicle shortages are often difficult to anticipate.

Q3. How have fluctuations in commodity prices for soda, ash, natural gas, and key raw materials impacted procurement costs and supplier strategy across India and global sourcing operations in the last two years?

Over the past two years, we have observed significant fluctuations in soda ash prices, with notable peaks and valleys. The soda ash industry is highly dependent on energy, primarily natural gas, as the use of furnace oil and coal is largely banned due to environmental concerns.

Natural gas is the primary energy source for soda ash production. Fluctuations in natural gas prices have a direct impact on soda ash costs. For example, as winter approaches, natural gas prices typically rise due to increased demand for heating in Europe and the US. As production remains stable but demand increases, prices rise accordingly. This increase in demand leads to higher procurement costs. For example, in 2021, soda ash prices were around 18,000 per metric ton. By 2023-24, prices had increased to approximately 25,000 to 27,000 per metric ton in the Indian market. Similarly, natural gas prices in 2023 were around 37 per SCM. We have seen significant fluctuations, with prices declining in the summer and rising to 40-47 per SCM in the winter. These are examples that illustrate the impact on procurement costs.

Q4. What risk mitigation strategies have proven most effective in managing price volatility in domestic versus imported Material procurement?

For example, if you I'll start with the imports. Imports you can go for hedging to the risk mitigation for price volatility. For example, I can.

For example, in June and July, Nalco aluminum prices were around 243 per kg, based on the bulk prices I managed. Currently, prices have increased to 283 per kg, influenced by dollar fluctuations and foreign exchange rates. If prices had been hedged in June, it would have resulted in significant savings.

In this case, hedging would have provided a savings of 40 rupees per kg, which I have experienced firsthand. Additionally, multiple sourcing from different regions is another effective approach.

During the reopening after COVID, Chinese companies began offering competitive prices and booked significant vessel space. This led to a shortage of vessel availability in Western countries, causing prices to rise. Proactively sourcing domestically instead of relying on imports could have mitigated this risk.

Having a risk-mitigating strategy like this, we can, moreover, in imports, go for long-term contracts and use inventory optimization and other tactics to protect against price surges, and if you come to domestic. For domestic sourcing, volume consolidation is beneficial.

We can leverage volume-linked incentives and pursue A-rate contracts as part of our risk mitigation strategies. The effectiveness of these incentives, however, varies by commodity. For instance, in the case of materials like polyvinyl butyral (PVB), higher purchase volumes generally lead to lower unit prices.

So, you can, whenever the volume goes high, the prices will reduce. For instance, if I secure a price for 100,000 square meters, the rate is 7 USD per square meter.

Increasing the volume to 110,000 or 150,000 square meters typically results in further price reductions. However, the pricing dynamics differ for other raw materials, such as cullet. For cullet, the initial price may be around 10,000 for volumes up to 5,000 tons per month, but as a direct raw material for the glass industry, suppliers sometimes charge higher prices at greater volumes to offset energy and recipe costs. Interestingly, procuring more cullet can indirectly reduce both energy and raw material expenses, making it an effective risk mitigation strategy. Adopting such approaches helps lower overall costs.

Q5. Can you share current trends in logistics and import challenges for key strategic materials sourced from Asia and Europe?

When sourcing from Europe, there is a strong emphasis on sustainability compliance, which adds considerable complexity to systems and procedures. This often requires extensive documentation and additional administrative work. In contrast, sourcing from Asian countries, such as China, involves different challenges.

During the COVID-19 pandemic, exports from China stagnated, resulting in significant difficulties securing containers and vessel space. While the pandemic has subsided, logistics challenges persist. For example, the ongoing Red Sea crisis has forced vessels from Europe to take longer routes around the Cape of Good Hope to reach India, increasing transit times from 30 to 45 days and raising costs by 25 to 30 percent. These are the current trends, though we anticipate cost reductions if energy prices fall and vessel availability improves. Additionally, exploring direct sourcing from American, Chinese, or Southeast Asian countries for certain metals—comparable in quality to those from Europe—could also help reduce costs. We expect these adjustments to yield tangible benefits in the near future.

Q6. How has the shift towards sustainability influenced vendor criteria and collaboration efforts, especially concerning recycled materials and eco-friendly inputs?

Sustainability has become a key factor in vendor selection, with a strong emphasis on the use of recycled materials. For instance, when sourcing glass bottles, we evaluate whether vendors are increasing the proportion of recycled cullet and colored glass in their production processes. Setting such criteria encourages suppliers to adopt more environmentally friendly practices. Additionally, importing from foreign countries typically increases the overall carbon footprint due to longer transportation routes.

Our collaboration efforts also prioritize sourcing materials from local or nearby suppliers whenever feasible, further supporting eco-friendly initiatives. By minimizing transportation distances—such as sourcing regionally instead of from distant locations—we are able to reduce diesel consumption and lower our overall environmental impact. For example, procuring materials from suppliers close to Andhra Pradesh or Hyderabad significantly cuts down on fuel usage. These strategies collectively help advance our sustainability goals.

Q7. If you are an investor looking at companies within the space, what critical question would you pose to their senior management?

My first question to senior management would be about sustainable sourcing:

Are they actively pursuing sustainable sourcing practices?

Next, I would ask about the proportion of imported versus domestically sourced materials. A high dependence on imports can expose the company to geopolitical risks, while domestic sourcing may offer greater stability and predictability.

My third question would focus on energy efficiency. For example, if I were considering investing in a glass bottle manufacturer, I would inquire about their primary energy sources. Are they using natural gas, coal, coke, or furnace oil?

Since coal, coke, and furnace oil are significant sources of pollution, there is always the potential for government restrictions aimed at reducing carbon footprints. Therefore, I would want to know if they are using cleaner energy sources such as natural gas or LPG.

Additionally, I would ask whether their procurement practices comply with geopolitical, sustainability, and energy risk guidelines. Are they strictly following government regulations, especially regarding the use of natural resources? For instance, are they paying required royalties on time? These are the types of strategic questions I consider essential when evaluating a company's long-term viability.