CE Raw Materials – Update
Over the last two years we have noted the somewhat unusual price volatility among raw materials used in consumer electronics and how they have affected component and device pricing. During that period, many of the raw materials used in consumer electronics manufacturing and devices have increased in price, some to record levels, which in some cases has limited supply and in others just raised BOM costs. While the effect has been pronounced up and down the CE supply chain, while some CE product categories able to keep pace with matching price increases while less price flexible product classes absorbing the increases, lowering margins and increasing inventory carrying costs.
Roughly 50% of a typical PC is made from various metals and in our 01/07/22 note we showed a table that noted the price increases of various metals used in consumer electronics during the 2021 year, and while the table does not represent a complete list of such metals, it does give some reference points as to how those same metals have performed so far this year. The average increase in the prices of the metals in our list in 2021 was 79.67% while thus far in 2022 the same list has seen a decline of 3.6%, but what is more significant is that from the end of 2021 to the peak (March/April)) the list generated a gain of 31.3%, and since that peak the list has seen a 26.8% decline.
All in, things looked extremely bad in March/April, and while they are only modestly below last year’s closing prices, they are well below the peak. We expect 3Q CE product production costs to have declined relative to 1Q, giving CE companies a small bit of breathing room as to holiday pricing, but there was considerable finished inventory in the channel for many products coming into the quarter, a portion of which carries some of the earlier high cost burden. If brands are able to sell of a reasonable share of the excess inventory, some of the raw material price declines will begin to show toward the end of the year, especially if metal prices continue to decline. While there are still many other pricing issues that remain, at least a number of raw material metal prices have begun to decline. It’s a small point on which to hang a hat, but at least there is something to be optimistic about, which certainly was not the case earlier this year. Selected charts are shown in Figure 1.
Roughly 50% of a typical PC is made from various metals and in our 01/07/22 note we showed a table that noted the price increases of various metals used in consumer electronics during the 2021 year, and while the table does not represent a complete list of such metals, it does give some reference points as to how those same metals have performed so far this year. The average increase in the prices of the metals in our list in 2021 was 79.67% while thus far in 2022 the same list has seen a decline of 3.6%, but what is more significant is that from the end of 2021 to the peak (March/April)) the list generated a gain of 31.3%, and since that peak the list has seen a 26.8% decline.
All in, things looked extremely bad in March/April, and while they are only modestly below last year’s closing prices, they are well below the peak. We expect 3Q CE product production costs to have declined relative to 1Q, giving CE companies a small bit of breathing room as to holiday pricing, but there was considerable finished inventory in the channel for many products coming into the quarter, a portion of which carries some of the earlier high cost burden. If brands are able to sell of a reasonable share of the excess inventory, some of the raw material price declines will begin to show toward the end of the year, especially if metal prices continue to decline. While there are still many other pricing issues that remain, at least a number of raw material metal prices have begun to decline. It’s a small point on which to hang a hat, but at least there is something to be optimistic about, which certainly was not the case earlier this year. Selected charts are shown in Figure 1.
Figure 1 - Metal pricing for Copper, Cobalt, Nickel, Gallium, Palladium, and Aluminum - Source: TradingEconomics
RSS Feed