April 2021 Supply Chain Update


Our previous update saw CRC Steel hit an All-Time high of $1,464 per MT. As of last week, it was up to $1,624 per MT, with no signs of slowing down; continually breaking new records since the start of the year.
Steel price benchmark

Copper demand continues to stay strong and with the ongoing Global Plastic shortages (more on that below), the cost of finished cable has gone up nearly 10% in many cases, as the jackets used on wire are made from a suddenly hard to source material, due in part to the ongoing plastic and resin shortages we faced during the pandemic.
Copper pricing graph

The Texas deep freeze and port backlogs compounded problems for manufacturers and distributors already plagued by pandemic disruptions. As a result, we are now seeing more major shortages of some products in our industry that rely heavily on plastic and related chemicals.
Prices for polyethylene, polypropylene and other chemical compounds have reached their highest levels in years in the U.S. as supplies dwindle.
Price surges related to PVC, which caused finished goods to quadruple in cost in some cases (e.g. conduit), spurred a national shortage of UF and Romex cable. THHN might very well be next if these manufacturers split their raw resources on hand to make more and more Romex. Certainly something to watch.

Overview of Electrical Supply Chain Key Components


Covid Supply Chain Disruption

March 2021 Supply Chain Update


The cost of base metals has been steadily climbing for months. This effects not only the costs for cable and conduit, but most everything we stock.
Cold Rolled Coil, the steel our industry relies on, went from $850 in October 2021, to $1100 by New Years, and is currently at $1464 as of this update.
cold steel graph

We are continuing to see issues with availability for certain product categories and prices are higher on almost everything due to pandemic expenses and higher cost of base materials.

Spril 2021 Supply Chain Update

March 2021 Supply Chain Update

The Covid-19 Supply Chain Struggle — 2020 in Review


Our Sales staff has been answering the same two questions for almost a year now: “What is going on with pricing?” and “What has happened to stock?”. Easily the two most important concerns for both Contractors and Supply Houses.
Nearly every conversation regarding buying material starts with, “How much do I pay, and how soon can I get it?”. The answer to both…more than you used to, and we hope it won’t take too long.

So, how did we get here? It is important to understand the timeline for all that has happened in our industry. We have even gone as far as logging, and explaining, which increases were happening, in which core segments and due to what reasons on our website at https://paramont-eo.com/supply-chain-impact-update/. This information was being shared, in an effort to keep our clients up to date on supply chain issues, as well as rising costs, so they could plan accordingly for their projects.

The first tremor in the cost/supply chain came in January of 2020, but actually the surge in the cost of our industry’s base metals started in Spring/Summer of 2019. PVC, Aluminum, Zinc, Copper and Steel all climbed steadily, thanks to a combination of tariffs, market speculation and demand as our economy was humming along.

A quick look back at a years’ worth of metal pricing.



Historically, most manufacturers would often shield these increases until they had to source additional base material or until they saw if the market settled. That would usually mean an actual finished goods price increase wouldn’t happen until the situation had been vetted. The cycle could take 2-4 months before new price sheets would go into effect on many “white” goods.

The extended window would give Distributors time to load new costs, set new contracts and buy new stock at the soon-to-expire price. And most importantly, it would allow time to help us position our customers’ ongoing projects that would most certainly be affected by the higher costs.

And then came 2020. Typically, most major price increases go live to start the year anyway, and 2020 started off no differently. But unlike the usual, expected 3-5% bump, the new increases were often double-digit hikes. That sent a lot of Supply Houses into a buying frenzy, overstocking their shelves before the new pricing took effect. Mind you, this all happened during the winter slow season, which wouldn’t be much of a story, unless something else major happened.

What happened next, hadn’t happened in generations. The global threat of COVID-19 was only starting to be realized in late January. China suddenly locked down tens of millions of people in nearly a dozen cities surrounding the virus epicenter of Wuhan, but their mitigation efforts couldn’t stop the spread outside their borders.

When most of the US went into lockdown at the end of March, it directly led to the supply chain strangle we are still battling. To put things simply, everyone went out and overbought in January and February. Those cold winter months are usually the slowest times of year for manufacturers, so they would often slow production during those months to match demand. So, when the demand skyrocketed early in 2020 many manufacturers didn’t have enough stock to fill orders. In a normal year, they would just ramp up production in March/April to fill their back order log, but COVID-19 made that mostly impossible.

On top of that, transportation options suddenly became limited as everyone started having everything shipped to their homes or distribution points. Just finding a truck was hard enough, let alone the staffing needed to make, or even simply ship material. And it wasn’t just the US that shutdown nonessential business, the rest of the world started to as well and all around the same time.

In a global economy, being able to source parts from many different nations to cut down costs, is a great idea. During a pandemic, relying on so many different places for the components needed to make just a single unit, became a complex liability. You can’t ship a dimmer that is only 90% complete, as you wait for a part to come in from Mexico to actually make it work.

It was a perfect storm. With stocked product already hoarded before the pandemic, slowed or even completely halted production of new product, quarantined container ships, and transportation delays, a new wave of frenzied buying began as Supply Houses attempted to get any remaining goods ahead their competition.

As the year went on, many manufacturers were able to restart, or simply ramp up production due to loosening restrictions and improved COVID safety protocol implementations. And while a lot of product started moving again, it mostly went to fill the backlog.

Similarly, for Electrical Supply Houses like us waiting on that material, product would come in and go right back out again to the list of clients waiting on back orders, with little leftover to replenish stock. Through great partnerships and good planning about 95% of what we needed, we had. That last 5% though, was and still is, brutal to source.

As more and more of COVID-related costs were incurred by the manufacturers, along with their own increased costs from those that supply them, a series of cost increases unlike any I have ever seen in my decades of buying were unleashed. Beyond what the charts above show in terms of the surge in base material pricing, there were now so many other factors at play pushing costs to new highs.

Despite our efforts to help shield our clients from these surging prices, the increases were inevitable; there were simply too many factors at play. We did what we could to price out our stock based on what we paid, and not just what it was worth, to help keep our clients treading water with the projects they had previously quoted, and we also worked to mitigate contracts on behalf of our customers to ensure price guarantees for their projects were held as long as possible.

To be sure, these price increases and supply chain matters affect all of us. The core components of our business here in Chicagoland, Steel Pipe and Copper building wire, both have gone up 60% since last Spring. That not only drives our stocking price up, but also the net cost to our customers and their end users as well.

Other, less transparent impact to Electrical Supply houses, beyond the increased holding costs of stock itself, was the need to honor blanket pricing for a certain period which had been agreed to when the price and availability of stock wasn’t nearly as volatile. In addition, we faced larger freight allowed goals, as many of those went up with the cost of transportation, forcing us to buy more with each PO in order to avoid paying freight. And on top of that came the introduction of new term to our industry, the “Freight Adder”, which basically was a way to charge us more, even when we hit our free freight allowed target.

With all Electrical Supply Houses struggling with the exact same issues, and their clients as well, we realized we really are all in this together.

Whether it be our fourth price increase on steel fittings over the past 6 months, or PVC conduit now costing three times as much as it did just 6 months ago. All we can do now is roll with what comes our way, and make sure our clients are aware of what is happening.

We are so grateful for the support and understanding our amazing customers have shown throughout these unprecedented times. We are continuing to do everything we can to support your projects, your own stock needs and most importantly, to support you. Our clients are, and will always be, the lifeblood of Paramont EO & Crest Lighting.

New Year, New Price Increases

January Supply Chain Updates

The cost of base metals have been steadily climbing for months. This effects not only the cost for cable and conduit, but most everything we stock.

If the US dollar stays weak, it organically costs more to buy materials. If the supply chain stays strangled, it costs more due to demand. If the Pandemic drags on, things cost more due to COVID shutdowns. Combine all three dynamics and price increases become inevitable.

New kinks in the Supply Chain – October-November Edition
As the US continues to wait for a COVID Stimulus plan to be released, so does the EU. And with every new report of a highly functioning vaccine that gets reported, metals have been spiking. The market always responds well to positive outlooks.
The vast majority of products in our industry touch both Copper and Steel. And as such, the value (and replacement costs) of those goods are at near recent record highs.
CU hit its 2 year high yesterday, topping out at $3.2395. This is the highest its been since June 2018.
As you can see below, Copper has soared back to life nearly every week since the initial COVID shutdowns.
We have gone from a 1 year valley of $1.97 per pound. to a 1 year peak of $3.24 per pound.

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Steel is no slouch either. CRC, Cold Rolled Coiled, is the base for our metallic raceway, and the metal that most effects our finished pipe price.
The below chart shows that is was being purchased for $700 US per ton over the summer. It is currently at $942 and climbing. This has lead to record prices being asked for finished goods in our market.
Nearly all “like” manufacturers are asking for the same higher costs these days. Forcing everyone to raise prices for product effected by these base metal increases.
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In addition to price increases, we are still seeing some abnormalities in our supply chain as shown below:
October-November Supply Chain


September Status

September Supply Chain Update
As we wrap up August, certain products are becoming harder to source and a lot of price increases are looming. Here are the details:
August Supply Chain

Coronavirus Impact on Supply Chain July Update

July_update


KEY TAKEAWAY?

As most supply availability stabilizes, many prices are rising.


Supply Chain Challenges as Coronavirus Continues

Our current struggle seems to be getting goods from Mexico and India. Mostly fittings, as of now.

Both countries started coming out of their lockdowns in June. And, just like the US, both of them saw a huge surge in cases.
Our previous update was based on the assumption that things would slowly be coming back online by the end of summer. Now, it appears factories and docks will still continue to split shift and run at reduced capacity, to once more try to slow the spread of COVID-19.
The sky is not falling, we are still sourcing >95% of what we need without issues, but <5% still carries a prolonged lead time of months on end.
Below are current new stats for Covid-19 cases, as of right now, for these two countries.
Covid-19 Cases in Mexico
Covid-19 Cases in India

On the flip side of all this, is an increase in the value of goods. Many price increase letters have been sent, and many price files were updated recently to reflect those higher stock costs. The new pricing is due to both the increase cost of transportation (in very high demand) as well as COVID-19 related cleaning and split work shifts, to help keep workers safe.

These are not huge fluctuations in cost, less than 5% in most cases, but still an increase on a lot of what we buy and sell.

The biggest jump has come in the cost of copper and copper-related goods.

As you can see below, we are riding a wave of copper value pricing. We are nearly back to the highs of Q4 2019.
Copper Pricing
China has recovered faster, and started consuming metals again. That caused a spike in pricing. But also, there is less copper coming online from the mines.

The top two copper producing nations, Chile and Peru, are just now being hit by the Coronavirus. As those cases continue to climb, those countries will start to pull back on production as the rest of the world has, as they are forced to limit their workforce.

It is important to note, unlike finished goods, there will not be a shortage of copper, even if many of the largest mines shut down. We have drawn enough copper from the earth to last for years, and it is easily recycled. Instead of a shortage, you will just see a continued rise in cost per pound instead.

Covid-19 Cases in Chile

Covid-19 Cases in Peru

Read our Previous Supply Chain update here