New tariffs on raw materials – what this means for Krakow factories
Geopolitics is not just headlines in the evening news. For a factory owner near Krakow, it is a specific invoice for steel that suddenly increases by over ten percent without any warning. At Korona Corporate Governance, we analyze the facts, and these show that the upcoming changes in tariffs will hit the margins of 47 local plants faster than their financial directors assumed.
Real costs of new customs policy in Lesser Poland
Recent decisions at the EU level have introduced confusion in the price lists of raw materials that Krakow's industry needs for daily work. We are mainly talking about specialized aluminum alloys and structural steel imported from eastern directions. Our analyses show that the real cost of purchasing a ton of raw material for a metal processing plant in Niepołomice increased by an average of 8.7% in just 34 days. This is not an increase that can simply be ignored or passed on to the end customer without the risk of losing orders to competition from southern Europe.
Analyzing data from 14 medium-sized manufacturing enterprises from around Krakow, we noticed a certain pattern. Companies that do not have rigid risk management structures lose the most on exchange rate fluctuations and border fees. For example, one machine parts factory in Skawina overpaid for raw material transport by 12,400 PLN just because the customs documentation was not prepared in accordance with the new guidelines from July 2024. Such mistakes are a pure cost that results from a lack of organized internal processes, and not from the political situation itself.
Principles stronger than the crisis – that is our slogan, which in this context takes on a hard meaning. If the raw material purchase process in your company relies on a trader's habits rather than a hard structure of procedures, every new tariff will hurt twice as much. We have seen this many times over the 8 years of our activity. A stable structure is one that anticipates cost increases of 5-7% and has a ready contingency plan to change a supplier within 11 business days before the warehouse empties.
A hard structure is the foundation when the margin escapes across borders without your consent.
Why will Krakow factories feel this more strongly?
Krakow and surrounding municipalities like Zabierzów or Wieliczka stand on precision industry. We produce components where the material cost often constitutes over 43% of the final price. With such a bottleneck, every change in customs tariff by 3.2% becomes a matter of profitability for the entire contract. We talked to 9 production heads and each of them admits: the era of cheap raw materials from imports without barriers has just ended. Now what matters is how quickly you can adapt your cost structure to the new reality without losing the quality you promised your recipients.
Most local companies operate on margins oscillating around 12-18%. If new tariffs consume 5% of that, the owner is left with very little room for error or investment in machinery. This is exactly why at Korona Corporate Governance we emphasize laying the foundations of your peace of mind. This foundation is the knowledge of exactly where the costs come from and how to block them at the operational level. We are not interested in promises of a better tomorrow, we are interested in whether your accounting department knows how to settle imports from 3 new directions that we analyzed last week.
We also noticed that the problem is not the price of the raw material itself, but its delivery time and border delays. In August 2024, the average clearance time for goods covered by new tariffs increased by 2.5 days. For a factory working in a just-in-time system, this is a disaster that can stop the assembly line. Facts matter, not forwarding promises – if you don't have an alternative supply chain written into the company's procedures, you are a hostage of one border crossing and one official. We help write down and implement these procedures.
Alternative directions and hard logistics
The solution is not waiting for tariffs to be abolished. This will not happen within the next 18 months. The solution is diversification, i.e., breaking down purchases into smaller lots from suppliers from regions covered by preferential rates. We analyzed the Balkan market and Caucasian countries – raw materials with parameters consistent with PN-EN standards can still be found there, which after adding transport are about 6.4% cheaper than current supplies from Asia burdened with the new tariff. This requires a change in the purchasing structure and new framework agreements.
Switching to new suppliers is not a process that can be done 'on the fly'. It requires an audit of 23-28 different parameters, from certificates of origin to the contractor's real production capabilities. At Korona Corporate Governance, we have developed a supplier assessment sheet that shortens this process from 2 months to 14 days. Thanks to this, one of our clients, a fittings manufacturing plant, managed to replace 31% of its steel supplies with a Turkish direction even before the new customs rates fully came into force. This saved its financial liquidity in the third quarter.
Remember that logistics is only half the battle. The other half is what happens inside your company. Do you have a designated person who daily monitors changes in the ISZTAR customs tariff? If this duty is blurred between the reception and logistics, information about cost changes will reach you when it is too late to react. We build hard management principles that close such gaps once and for all. We build foundations that give the owner peace of mind, even when the situation at the borders is uncertain.
Logistics without procedures is a gamble your factory cannot afford.
Action plan: 3 steps for your plant
The first step is a full inventory of current contracts and their expiry dates. You must know how much raw material you have contracted at old prices and for how long it will last. From our experience, 23% of companies do not have a central register of contracts with guaranteed prices, which is a huge risk with rapid customs changes. Check if your suppliers have clauses allowing them to raise the price by the value of new taxes and tariffs during the order. This is a key fact that determines your strategy for the next 11 weeks.
Step two is a revision of the cost management structure. In times of raw material crisis, every ton of production waste weighs more in the balance sheet. In one of the plants in Krakow's Podgórze, thanks to a better layout of sheet metal cutting processes, we managed to reduce waste by 4.7%. This seems little, but on an annual scale, it is a saving of 38,200 PLN – an amount that almost entirely covered the increase in energy costs. These are hard management principles: looking for profit where others only see fixed costs. We don't promise miracles, we show where your money is leaking.
The last step is preparing the team for changes. Your people must understand that the fight against customs costs is not a temporary fashion, but a fight for the survival of the workplace. Introducing simple, clear procedures for reporting raw material prices by the purchasing department once a week (instead of once a month) allows for a reaction before the invoice is issued. Frankly, most companies that come to us have this data in the system, but no one analyzes it in real-time. We change that. Hard structure, certain profit – it's not just a slogan, it's the result of well-executed fundamental work.
