Sky-high prices and scarce electrical supplies wreak havoc on supply chains!
The electrical supply chain has faced significant disruptions and price increases throughout 2022, with the combined impacts of the Ukraine war and the resurgence of COVID-19 in China exacerbating pre-existing challenges.
The Impact of the Ukraine War
The conflict in Ukraine, which began in early 2022, has caused destruction of critical infrastructure, including power generation and distribution facilities. This includes the Zaporizhzhia Nuclear Power Plant and thermal stations, leading to power outages and damaged production capabilities [1]. These disruptions have significantly impacted the electrical supply chain both locally and globally, due to Ukraine’s role in raw materials and components production.
Despite reduced industrial activity, Ukraine has managed electricity imports and exports with neighbouring European countries, maintaining some grid stability despite damages and attacks on infrastructure [2][5]. However, the conflict has caused energy price spikes and supply volatility, which impact the cost and availability of electrical components that rely on stable energy inputs and raw materials sourced or transited through the region [4]. Additionally, logistical disruptions from missile attacks on transport and distribution facilities have imposed further delays and costs in supply chains inside Ukraine [3].
The Impact of COVID-19 Resurgence in China
In 2022, China’s resurgence of COVID-19 led to renewed lockdowns and factory closures, disrupting global manufacturing and supply chains of electrical components, many of which heavily depend on Chinese production. These disruptions, combined with existing pandemic-related challenges like port congestions and increased freight costs, have worsened shortages and price inflation for components such as semiconductors, transformers, and circuit boards used globally in electrical supply chains.
Projected Prices and Availability of Key Electrical Components for the Rest of 2022
Prices of electrical components have remained elevated through 2022 due to sustained disruptions from both the Ukraine war impacts and China’s COVID-19 restrictions. Supply chains have continued to experience delays and shortages, particularly for raw materials affected by energy security risks in conflict zones, and logistical challenges exacerbated by ongoing pandemic conditions [4]. Forecasts from 2022 generally indicated that prices would remain high and availability constrained for several key components through the end of 2022, with gradual stabilization only expected if geopolitical tensions eased and Chinese production normalized, which did not occur fully within 2022.
Copper and Aluminum Prices
The prices of copper and aluminum used in wire and cable are stabilizing but are expected to hold near current high levels. Aluminum prices reached record highs in March, and copper prices have risen 8.97% from one year ago [6].
Galvanized Steel Prices
The price increases for galvanized steel used in panelboards are expected to remain high at least through 2022, due to a recent 28% surge [6].
The Future Outlook
The market for electrical supplies will continue to be disrupted until at least the end of 2022, making procurement of electrical components challenging. Natural gas prices have doubled this year and could reach 25% or more this summer. Diesel fuel prices in the U.S rose 71.47% from one year ago, and gasoline prices climbed by 50.55% from one year ago [6]. Shipping disruptions will continue to add to lead times for switchgear, a large and bulky item.
The demand for electrical parts and supplies surged in a historically fast recovery from COVID-19, causing challenges for businesses that had scaled back production. Subscribing to Raiven's quarterly supply chain updates can provide the latest pricing trends from industry experts. U.S. steel prices skyrocketed on average 28.3% in April 2022 over March 2022 [6].
Both Ukraine and Russia are significant producers of aluminum, copper, and steel, and worldwide demand for these materials has slackened after a huge increase over the past two years. Contacting Raiven can provide information on managing electrical supply costs in today's challenging markets. Customer demand for electrical projects remains higher than normal despite the challenges, putting pressure on margins.
The price of copper used in circuit breakers is expected to see smaller price hikes over current levels in the remainder of 2022, as prices have moderated recently. The war in Ukraine has caused high prices, product scarcity, and project delays to persist throughout 2022. Joining a group purchasing program like Raiven or Avendra can help contractors negotiate up to 25% discounts from suppliers and manufacturers. Lead times in the electrical supply chain are still prolonged. The war in Ukraine has inflicted more strain on shipping, further complicating the supply chain.
[1] Ukraine war causes power outages and damaged production capabilities [2] Ukraine electricity consumption falls to about 30% of pre-war levels [3] Logistical disruptions from missile attacks on transport and distribution facilities [4] Energy price spikes and supply volatility in Ukraine [5] Ukraine's electricity imports and exports with neighboring European countries [6] Prices of copper, aluminum, and galvanized steel
Global trade in electrical components has been disrupted due to the operational challenges faced in the transportation and distribution sector, particularly in Ukraine, where the conflict has resulted in power outages, damaged production capabilities, and logistical disruptions from missile attacks on transport and distribution facilities. Furthermore, the resurgence of COVID-19 in China, leading to renewed factory closures and port congestions, has worsened the shortages and price inflation of critical components such as semiconductors, transformers, and circuit boards, which are heavily reliant on Chinese production. These challenges have caused significant difficulties in supply chain management, particularly in procurement and distribution. In addition, the turmoil in global trade has impacted the sports industry, as equipment reliant on these components may experience delays or cost increases, potentially impairing performance or availability.
