Although we are already overcoming Covid, the aftermath it has left on the industry in terms of raw material supplies is enormous.
The effects of Covid, the pandemic of 2020 and 2021, have impacted much of the industry and supply chain worldwide, and our industry has been greatly affected.
Our LED and driver suppliers have extended their delivery times by more than 20 weeks and, in special cases, up to 40 weeks.
The prices of raw materials as basic as aluminum, which accounts for 30% of our products, have increased by more than 136% on the London Stock Exchange, from U$ 1,675 in March 2020, reaching a peak of U$ 3,968 in March 2022, and currently hovering around U$ 2,900.
Price increases for LED chip products range around 40%, and for drivers we have seen increases exceeding 60% due to demand.
The energy crisis in China has added another important factor to the shortage in our industry, further delaying the manufacturing process due to power outages.
Additionally, increases in logistics chain costs have caused shipping containers from the East to rise from U$ 3,000 to peaks of U$ 22,000, which has severely impacted transportation expenses.
The demand for energy-saving products, such as those in our sector, has been restricted due to the lack of production caused by Covid and is now being greatly affected by the Russia–Ukraine war. European sanctions against Russia, a major producer of raw materials for LED chips, have made it impossible to purchase these raw materials and have forced the search for new suppliers in Africa and Latin America. Although the raw materials exist, these commercial connections are still being developed, adding further delays.
Therefore, our lighting industry does not foresee a quick solution to these effects before the second quarter of 2023.
The entire year 2022 will be affected by shortages of raw materials and finished products, with orders to our suppliers exceeding 6 to 8 months. The uncertainty of prices due to high demand and the lack of available inventories to meet requirements is creating great instability in our sector.
Our suppliers are asking us for a purchase forecast of more than 12 months in order to plan the supply chain, with the major drawback of not confirming the final sales price, which is subject to and varies according to the cost of obtaining raw materials. Some suppliers with whom we have worked for more than 20 years have rejected our orders simply because they cannot meet delivery deadlines or prices, postponing the confirmation of the order to an unspecified future date.
High Lights has made enormous efforts to control delivery times and prices, but it is of utmost importance to have a purchase forecast from our clients in order to guarantee those delivery times and product availability.
Our price increases have been very moderate compared to the severe rises from our suppliers. This means that as the year progresses, we will have to make further adjustments in order to secure our raw material purchases.
We trust that the situation will continue to evolve and gradually move toward improvement, resolving the shortages and achieving stability in both supply and prices.
In the meantime, the only solution to guarantee the supply of our products to our customers is to plan their needs 6 to 8 months in advance in order to fulfill them.
HIGH LIGHTS SAS.