Supply Chain
2021 Supply Chain Issues in the Wire & Cable Industry
2021 has been an unprecedented year in the wire and cable and many other industries due both to significant price increases and supply chain issues.
The impact of the supply chain we have been seeing in 2021 is the direct result of what happened back in March 2020 when for a period the markets around the world partially or fully shutdown due to the Covid-19 pandemic.
The uncertainty around supply and demand during this period resulted in some temporary shutdowns, of production facilities and supply chain routes around the world that supply the raw material components for the manufacturing of wire and cable products.
In 2021 we’re seeing the impact of that slowdown from Q2 2020.
In summary below are the raw materials used in wire and cable which have been impacted by price and supply chain problems in 2021.
Copper/Aluminum: Conductor, armouring, shields, concentric wires.
Copper: The Canadian copper base increased 21% in 2020 after a significant decrease in Q1 2020 and increased another 23% by September 2021.
Copper is purchased in USD and the US$ price per pound which averaged $2.80 per pound in 2020 was at $4.80 per pound in September. It has been predicted by some in the industry that it could reach $5.00 per pound before the end of 2021. The increase is due to several factors. Increased consumption in China which represents 30% of the global supply, and increases in Renewable Energy, Electric Vehicle production and other Energy related projects all of which consume significant amounts of copper.
The top copper producing countries globally are Chile and Peru who represent 40% of the global supply followed by China, DR Congo, and the United Sates.
The short-term forecast for copper is continued price volatility and the longer-term implications are that unless more copper production is opened, we could have demand overtake supply by 2025. Below is a chart illustrating the Canadian copper base in 2021.
Aluminum: The Canadian aluminum base increased 7% in 2020 and has increased 47% year to date 2021 (as of September) and 22% since July. Aluminum doesn’t corrode easily and conducts electricity well and it’s lightweight. There is a high demand for this product in the auto industry where there is a need to produce lighter and fuel-efficient cars.
World primary estimated aluminum production totaled just over 64.4 million tonnes in 2019. China was the world's largest producer with 36 million tonness, followed by India, Russia, and Canada. Aluminum prices are expected to increase over supply concerns from China in addition to continuing increase in demand.
Steel: Reels, Support wire, Steel tape shield/armour
Steel is used as the core component of overhead aluminum conductor to supply support of the cable which is installed across Hydro Towers and utility overhead primary infrastructure installations. It is also used as a component in some industrial and utility power cables.
Steel prices have reached record highs as demand is surging, but capacity is not an issue so there has been a fluctuation of price downwards over the last 6 months, as businesses step up production amid an easing of pandemic restrictions. Steel makers have consolidated in the past year, allowing them to exert more control over supply.
Compounds: Polyethylene, PVC, EPR/XLPE, XLPO, Jacketing
PVC is used as a jacket material for various wire and cable products predominantly in residential applications. Demand for PVC pipes and vinyl siding is higher as home sales and remodeling projects drive sales. A significant component of PVC resin production is from refineries in Texas and a significant weather event in March 2020 impacted production.
Polyethene used in a wide variety of cables both as a jacket material and insulation.
Below is an indicator of the price trends for plastics.
Wood reels: Wooden Reels, Pallets, Crates
Initially the cost of lumber increased substantially early in 2021, peaking in May, retracted, and started to increase again in September. Wood is used in all packaging items associated with wire and cable which includes reels, pallets, crates, and lagging.
Other Wire and Cable raw material components: Tapes, binders
Mylar tapes and binders have also increased significantly in 2021. These products are used for separator tapes in addition to water blocking components for power cables.
Transportation: Ocean and truck freight, container storage and brokerage fees
The freight costs across the supply chain have increased due to shipping constraints, volumes, the cost of fuel and a shortage of labour.
Container shipping costs have also increased which are used to ship raw material, processed products, and finished goods from one continent to another. Domestic freight costs are increasing due to the increase in fuel costs in addition to supply/demand which has been stretched due to a shortage of drivers in North America. This impacts freight costs from raw material locations to the manufacturing locations in addition to the shipment of finished product from containers and warehouses to manufacturing locations, distribution warehouses or project sites.
Summary:
In summary how long these supply issues will remain is difficult to predict but two key factors for things to change will be the availability of labour and production volume.
If there is an imbalance between supply and demand prices will continue to hold at current market levels or possibly increase further, so unless there is less market demand as the result of economic factors or more production volume coming on stream into the marketplace that will not change in the short term.
2021 has been an unprecedented year in the wire and cable and many other industries due both to significant price increases and supply chain issues.
The impact of the supply chain we have been seeing in 2021 is the direct result of what happened back in March 2020 when for a period the markets around the world partially or fully shutdown due to the Covid-19 pandemic.
The uncertainty around supply and demand during this period resulted in some temporary shutdowns, of production facilities and supply chain routes around the world that supply the raw material components for the manufacturing of wire and cable products.
In 2021 we’re seeing the impact of that slowdown from Q2 2020.
In summary below are the raw materials used in wire and cable which have been impacted by price and supply chain problems in 2021.
Copper/Aluminum: Conductor, armouring, shields, concentric wires.
Copper: The Canadian copper base increased 21% in 2020 after a significant decrease in Q1 2020 and increased another 23% by September 2021.
Copper is purchased in USD and the US$ price per pound which averaged $2.80 per pound in 2020 was at $4.80 per pound in September. It has been predicted by some in the industry that it could reach $5.00 per pound before the end of 2021. The increase is due to several factors. Increased consumption in China which represents 30% of the global supply, and increases in Renewable Energy, Electric Vehicle production and other Energy related projects all of which consume significant amounts of copper.
The top copper producing countries globally are Chile and Peru who represent 40% of the global supply followed by China, DR Congo, and the United Sates.
The short-term forecast for copper is continued price volatility and the longer-term implications are that unless more copper production is opened, we could have demand overtake supply by 2025. Below is a chart illustrating the Canadian copper base in 2021.
Aluminum: The Canadian aluminum base increased 7% in 2020 and has increased 47% year to date 2021 (as of September) and 22% since July. Aluminum doesn’t corrode easily and conducts electricity well and it’s lightweight. There is a high demand for this product in the auto industry where there is a need to produce lighter and fuel-efficient cars.
World primary estimated aluminum production totaled just over 64.4 million tonnes in 2019. China was the world's largest producer with 36 million tonness, followed by India, Russia, and Canada. Aluminum prices are expected to increase over supply concerns from China in addition to continuing increase in demand.
Steel: Reels, Support wire, Steel tape shield/armour
Steel is used as the core component of overhead aluminum conductor to supply support of the cable which is installed across Hydro Towers and utility overhead primary infrastructure installations. It is also used as a component in some industrial and utility power cables.
Steel prices have reached record highs as demand is surging, but capacity is not an issue so there has been a fluctuation of price downwards over the last 6 months, as businesses step up production amid an easing of pandemic restrictions. Steel makers have consolidated in the past year, allowing them to exert more control over supply.
Compounds: Polyethylene, PVC, EPR/XLPE, XLPO, Jacketing
PVC is used as a jacket material for various wire and cable products predominantly in residential applications. Demand for PVC pipes and vinyl siding is higher as home sales and remodeling projects drive sales. A significant component of PVC resin production is from refineries in Texas and a significant weather event in March 2020 impacted production.
Polyethene used in a wide variety of cables both as a jacket material and insulation.
Below is an indicator of the price trends for plastics.
Wood reels: Wooden Reels, Pallets, Crates
Initially the cost of lumber increased substantially early in 2021, peaking in May, retracted, and started to increase again in September. Wood is used in all packaging items associated with wire and cable which includes reels, pallets, crates, and lagging.
Other Wire and Cable raw material components: Tapes, binders
Mylar tapes and binders have also increased significantly in 2021. These products are used for separator tapes in addition to water blocking components for power cables.
Transportation: Ocean and truck freight, container storage and brokerage fees
The freight costs across the supply chain have increased due to shipping constraints, volumes, the cost of fuel and a shortage of labour.
Container shipping costs have also increased which are used to ship raw material, processed products, and finished goods from one continent to another. Domestic freight costs are increasing due to the increase in fuel costs in addition to supply/demand which has been stretched due to a shortage of drivers in North America. This impacts freight costs from raw material locations to the manufacturing locations in addition to the shipment of finished product from containers and warehouses to manufacturing locations, distribution warehouses or project sites.
Summary:
In summary how long these supply issues will remain is difficult to predict but two key factors for things to change will be the availability of labour and production volume.
If there is an imbalance between supply and demand prices will continue to hold at current market levels or possibly increase further, so unless there is less market demand as the result of economic factors or more production volume coming on stream into the marketplace that will not change in the short term.
