At the beginning of 2021, “Price adjustment letters” from material suppliers came one after another. With rising prices for raw materials and a shortage of chips, there have been many doubts recently.
The client asks: Do you want me to cancel the order because the price is so high?
Are you saying you don’t want me to place an order?
All kinds of delay notice from material supplier: bulb delay of one month, transformer delay of two months, four months. And then the direct refusal to accept the order.
One side is the customer’s question. The other side is the raw material supplier, each kind of price adjustment notice. Manufacturers of holiday lights placate customers and urge suppliers of materials. It’s a long shot, but it’s a hard one.
The year 2020 is filled with fear and worry and more with gratitude!
2021 is full of hope and drive!
At the beginning of the New Year, the warm spring flowers are in full bloom, and life is full of vitality. Copper is up 38%, and iron is up 35%, aluminum is up 37%, stainless steel is up 45%, even plastic is up 35%, and so on. The related PCB board, wire, and cable, transformer, etc., all prices have risen. The price increase letter is as agreed by material suppliers. All kinds of raw material prices followed the voice. Makers of Christmas lights rise to the challenge.
The global epidemic is improving, the economy is gradually recovering, and industries everywhere are beginning to produce usually. However, many raw materials are also gradually optimistic about the futures market. After nearly a year of dormancy, industrial development will also be retaliatory growth. More materials prices also have an upward trend.
And then there’s the chip shortage.
As a producer country, China imports raw materials. Rising raw materials are bound to increase production costs.
With the COVID-19 vaccine in the world broad, we hope to bring the epidemic under control as soon as possible and get people’s lives back on track.
Impact on the industry of Christmas lights
All kinds of material prices continue to rise. Some prices increased more than 30%, leading to product production reduction, order delay, backorders, and even some products stop production and so on.
Some orders had to be suspended because of delays from the bulb supplier.
Also, because of the short supply of chips, Some orders have to return without the transformers.
There is also rising sea freight. Booking space became difficult, resulting in the production of good goods that can’t deliver typically.
Here is the picture of the details of the material.
The above picture has shown that some raw materials’ trends, such as copper, PVC, pulp and so on, have been rising continuously since the second half of last year. Since the beginning of this year, the increase is more prominent. Some raw material prices reached more than20% even within a month of the rise. The growth is shocking.
For the price change of raw materials, for the terminal price impact, consumers have personal feelings. For example, the copper wire used in electric cables, petroleum refineries are the primary source of plastic, and the rising price of cardboard has increased packaging costs. However, Rising prices of raw materials are bound to drive up prices of terminal commodities. Such as including lamp series, lamp modeling, many LED decorative lights, LED tree light product gains of 10% or more, individual products or even more than 20%. So why does the price of raw materials keep going up?
Why does the price of raw materials keep going up?
1，It is declining in production — affected by COVID-19.
While China has quickly brought the global outbreak under control since 2020, the rest of the world is still mostly affected. Under the impact of the epidemic, the production of many enterprises is involved, such as the chip industry, influenced by the epidemic global chip suppliers ushered in a shortage tide, the market demand for products in short supply, will cause product price increases.
2, the consumer electronics market demand is more significant. Until the outbreak is fully contained, raw materials and final commodities will continue their upward trend. At the same time, affected by the epidemic, home quarantine led to people’s consumption patterns have qualitative changes.
Such as currency overissuance. The world’s most significant event in 2020 will be the outbreak of the new crown disease. Countries have adopted quantitative easing of economic stimulus policies.
Multiple factors contribute to the surge in raw material prices after the New Year, not a single one. There are both loose monetary policy, supply and demand, rising transportation costs and other market reasons, and some artificial reasons for capital hoarding and speculation.
Raw materials are one of the main components of the cost of finished products. The price rise of raw materials will inevitably lead to the price rise of products and services in the whole economic market, such as the price of finished products, overall prices, financing costs, wages, stock prices, upstream and downstream industrial chains, etc.
How to keep the order normally delivery?
The impact of rising prices of raw materials is all walks of life, such as lighting, furniture, home appliances, electronics, textiles, tires, and other industries! And foreign trade enterprises are also facing rising sea freight. So on, the multiple factors overlay, the price rise is inevitable.
Rising prices will inevitably reduce profits. What can foreign trade enterprises do/how can we respond to the price increase of products caused by multiple factors such as raw materials?
1, keep close contact with customers
Communicate price trends and market information to customers promptly. At the same time, we should remind customers that the slow supply of raw materials may lead to a longer production cycle.
2, Adjust quotation in time.
As the price changes relatively significantly, need promptly (at any time) to adjust the price. Do Well quotation management and quotation control. To get the newest wholesale price of Christmas lights now!
3, Remind Customers to book the space as early as possible.
Due to the fluctuation of shipping costs and prices, the shipping space is also very tight. We will remind the customer to pre-identify the shipping space as early as possible to prevent delayed transportation due to the lack of shipping space.