June 21, 2022

Electrical Supply Chain Challenges for Q3 2022

2 Min. Read

Introduction

High energy prices and supply chain disruption are affecting most industries. The three major causes are:

• The global impact of the war in Ukraine.
• Surprising demand surges after COVID-19.
• Lingering production and logistics slowdowns from COVID-19.

The invasion of Ukraine sent shockwaves around the globe. Overall, it was a brutal blow to Ukraine and the world markets.

All of these factors have significant implications for electrical contractors. In this article, electrical contractors will get an update on what these factors mean for them in Q2 2022 and will see projections for Q3 2022.

Q2 2022 supply chain update

Materials

• Steel — Just as prices were easing post-COVID-19, Russia invaded Ukraine. Subsequently, U.S. steel prices skyrocketed on average 28.4% in April 2022 over March 2022.

Ukraine and Russia are major steel exporters. In 2021, Ukraine ranked as the world’s eighth-largest exporter. At the same time, Russia was the fifth largest.

Since the invasion, the Russian destruction of plants damaged Ukrainian output, and the European Union trade embargos stopped Russian exports. As a result, global supply is down, and price pressure is up. For electrical contractors, this has meant high prices for conduits, panels, boxes and fittings.

• Aluminum — Between January and March 2022, aluminum spiked 37% but has settled back down close to January 2022 levels. This metal is used in power line components and panels.
• Copper — Prices rose 7% between January and March 2022 to $10,230 per metric ton and have fallen only slightly as of April 2022. That is a huge 96% increase over the March 2020 price of approximately $5182 per metric ton.

Russia and Ukraine are significant copper producers, and sanctions against Russian exports may exert upward pressure on prices. At the same time, new economic slowdowns in China from resurgent COVID-19 have introduced more price volatility.

Wire and cable are the main copper products of interest to electrical contractors.

• Epoxy resin — S demand remains strong for these materials, and epoxy resin prices have surged in 2022. This resin is used in manufacturing circuit breakers.

Energy

The war in Ukraine has thrown energy markets into disarray. Here are some examples:

• Based on West Texas Intermediate crude oil, oil prices fell 3.2% since April 2022. In addition, diesel fuel prices in the U.S rose 71.47% from one year ago. Finally, gasoline prices climbed by 50.55% from one year ago as well.
• Natural gas prices have doubled this year and could reach 25% or more this summer.

All these factors have meant immense price pressure for manufactured goods.

Logistics

In addition to surging fuel prices, the war has disrupted trade routes such as the Euro-Asian railway through Russia. These disruptions are causing grave dangers to shipping to and from Ukraine.

Production and delivery delays

Manufacturers are still working through backlogs and struggling to find alternative raw materials. As a result, lead times for complex equipment like switchgear are longer.

Q3 2022 projections:

• Prices will likely continue to be higher than last year’s levels.
• Demand will likely drop due to Federal Reserve interest rate increases and lower consumer confidence.
• Component shortages will probably persist.
• Prices could increase 10 to 15% on average throughout Q2 and Q3.

Mitigation steps for electrical contractors

• Bid aggressively on supplies and materials.
• Build up essential parts inventory at current prices before prices go up.
• Stick with proven brands and suppliers to preserve quality.
• Develop more nimble procurement capabilities to manage change.

How Qmerit can help

Get on top of market trends. Read this report from Raiven which includes recommendations about overcoming electrical supply market challenges.

And be sure to contact us for more information about growing your business with our Certified Service Partner (CSP) program.