Q2 2022 Electrical Supply Chain Update

Consumers and contractors will continue to pay more for electrical supplies and face product shortages.

IRVINE, CALIFORNIA, USA, May 18, 2022 /EINPresswire.com/ — Supply chain issues continue to plague the electrical industry and research shows this is set to continue for the foreseeable future. End buyers of power projects should expect increased costs and project delays due to product shortages.

Raiven analyzed price trends on its platform and contacted electrical contractors, distributors and manufacturers to gather the latest information on the state of the electrical supply chain.

Q2 2022 expectations

The significant price increases observed over the past 12 months were largely attributable to post-Covid demand peaks (Q1-Q3 2021) and the subsequent shortage of transport resources (Q3-Q4 2021), which showed potential signs of easing until the Ukrainian crisis caused a spike in energy costs. These events have contributed to the largest increase in the prices of electrical materials in the last 30 years. The second quarter of 2022 will see the start of a decline in demand due to rising interest rates and falling consumer confidence. However, the continued rise in energy costs will counteract the decline in demand, resulting in continued increases, albeit at a more moderate pace, in electrical products.

Manufacturing energy costs increased by 54% in the first quarter of 2022, leading to pronounced increases in the materials that consume the most energy: cement, steel and concrete. Russia and Ukraine together were the world’s second largest steel exporter before the conflict, further worsening both the availability and rising prices of products made from steel. British Steel has announced a 25% price increase for all its products from March 2022 due to rising energy prices and restrictions on raw materials. There is no reason to expect (a) a reduction in prices for steel products throughout 2022 or (b) an improvement in the current status of backorders from 2 to 3 months, although a cessation of hostilities in Ukraine and Russia was expected to occur in the second quarter of 2022. The most affected products will include metal conduit, conduit fittings, panels and boxes.

Panels and switches

The first quarter of 2022 saw an unprecedented price spike of 22% compared to the fourth quarter of 2021. Going back to 1990, the previous high for a quarter-on-quarter increase was just 4.8% in 2005. Component shortages are expected to remain high through the second quarter, and we expect a continued upward movement in prices of 10-15% through the second quarter.

Panels are especially scarce due to aluminum and steel shortages. Aluminum is very energy intensive to manufacture and over 600,000 metric tonnes of production was suspended in Europe in January 2022 due to soaring energy costs following the Ukraine conflict. Another constraint on aluminum supply is the replacement of low-voltage power lines with less expensive aluminum wiring. Together, this leaves manufacturers below production levels and at operating costs that make products hard to find and expensive to manufacture.

Recommendation: Stock and account for 10-15% above the current price in 30-day project offers.

circuit breakers

The circuit breaker market in 2022 is expected to exceed $19 billion in 2022. The first quarter of 2022 saw an unprecedented 25% increase in prices compared to the fourth quarter of 2021. One of the contributing factors is that 60% of manufacturers still report a shortage of the insulating resin needed to manufacture these products. Additionally, a significant tax on resin imported into the United States was reinstated in January 2022, compounding price increases due to shortage with higher taxes.

Recommendation: Although a slight increase in product availability is likely to return towards the end of Q2, the price of circuit breakers should hold or increase slightly in Q2, with potential relief in Q3 2022.

Equipment

Major switchgear projects are already behind schedule for Q1 2023 delivery with transformers having a lead time of 54 weeks versus the historical average of 14-16 weeks.

90% of manufacturers surveyed expect 2022 delivery times to remain the same or increase by the end of the year despite efforts to increase production and find alternative sources of raw materials. The resulting impact will be a continued increase in price pressure, regardless of any potential economic downturn, given the large backlogs already in place through 2023.

For medium and low voltage switchgear, the main manufacturers are currently showing lead times of 12 to 16 weeks, with lead times of up to 40 weeks for certain projects.

Recommendation: 2nd and 3rd tier manufacturers are surfacing, but security and reliability issues are causing most to stay with established manufacturers like Schneider Electric, Eaton, ABB, Siemens and others, despite longer lead times.

wire and cable

In the first quarter of 2022, wire and cable prices (building and electricity) exceeded previous all-time highs during the 2005-2007 boom that preceded the 2008 real estate crisis. However, the rate of price increase during the quarter was a paltry 1.2% compared to its exponential rise throughout 2021. The volatility in copper prices is mainly due to the conflict in Ukraine as well as the unpredictability of production levels in China due to Covid and certain reductions in production as part of an environmental approach.

Recommendation: There is a 60% chance that we will see a price increase of 2-5% compared to Q2 2022 with limited availability and typical delivery times ranging from 3-12 weeks. There’s a 20% chance we’ll see a reduction based on slowing demand and a 20% chance we’ll see prices stay stable over several months.

Brett Knox, CEO of Raiven, describes how advances in technology can help entrepreneurs save time and money in these precarious times: at the lowest prices. Raiven launched its sophisticated algorithm in a browser extension during the pandemic to help contractors and facility managers find COVID essentials. It is now available for a wide variety of electrical, HVAC and building maintenance products. Brett continues, “We have never seen price volatility like we saw in the first quarter of 2022 and unfortunately it looks likely that it will continue. Raiven’s algorithms continue to identify price anomalies and product availability for high-demand products in short supply.

ABOUT RAVEN

Raiven is a leading procurement and supply chain management software platform enabling contractors and facility managers to digitally transform their procurement process and earn deep discounts on their everyday purchases. Raiven’s cloud-based sourcing platform helps businesses buy smarter and more efficiently with patent-pending AI algorithms that find in-stock products at the lowest prices.

jeff gold
Raiven
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