Nongshim, Ottogi hit hard by soaring palm oil prices

A customer grabs a pack of instant noodles at a supermarket in Seoul on Aug. 1, 2021. Newsis

By Kim Jae-heun

Nongshim and Ottogi, the country's top two instant noodle makers, have been hit hard by surging international prices of palm oil and wheat. However, the two firms are cautious about increasing the prices of their processed foods because they already did that last year causing consumers to bristle, a company official said.

"The prices of palm oil and wheat have continued to increase for several months now and it is right for Nongshim and Ottogi to raise the prices of their instant noodles. However, it's hard to do that. "Koreans are particularly sensitive about the price hikes of instant noodles as they are popular here due to their affordability," a source at a food manufacturer said, declining to be named. "There won't be any price hikes of instant noodles by local firms anytime soon, but it would result in a decrease in their operating profits, so their woes will only grow deeper."

Nongshim increased the price of its instant noodles by 6.8 percent last July and Ottogi by 11.9 percent a month later. It was Nongshim's first price hike in seven years and the first one in 13 years for Ottogi.

According to the Korea Rural Economic Institute, the price of wheat on the Chicago Mercantile Exchange rose from $280 per ton in January to $380 per ton this month. The price of wheat was $190 per ton last year.

The price of palm oil also hit an all-time high of $1,939 per ton on March 1, but fell to $1,776 per ton on May 1. The price of cooking oil stood at $900 per ton in May 1, 2021.

Nongshim said it has enough inventories of both palm oil and wheat.

"We do not face a shortage of raw materials needed to make our instant noodles and there won't be a price hike in the short term," a Nongshim official said. "However, we are closely watching the global shortage situation of palm oil and wheat as unexpected balloon effects can occur."

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