If you have been following our posts on the costs of China raw materials this year (2021) you will have seen that the prices have been rising rapidly in some cases.
Add this to the shipping delays and increased logistics costs and it’s becoming an expensive year for importers.
We’re tracking the raw material costs for some key materials and this month’s graph shows that some costs continue to stabilise, albeit at a higher level than before:
We’ve seen some price drops:
- Paper (the pulp cost dropped a bit and it is mostly seasonal, as the peak season for packaging in China is before Christmas and before the Mid Autumn Festival)
- Aluminum alloy. One reason may be the restrictions on electricity consumption and the difficulties in automobile production (due to a shortage of chips)
However, in the main, prices haven’t been moving southward.
The usual suspects have retained big price increases:
- Batteries (lithium cobalt oxides)
- Brass (despite a release of stock in the US)
- Silicone (some people mentioned an accident in a large polycrystalline silicon factory — Hesheng Silicon Industry in Xingjiang — as a cause for lower supply)
- ABS plastic
How to combat the rising costs?
Explore cost-reducing tips in this post: Rising Raw Material Prices: What Strategy To Follow? (6 Approaches).
If you’re purchasing electronic components, you may consider buying up inventory in advance to lock in the best possible price right now, too.
When it comes to electronic components, remember, the ‘best price’ isn’t always the cheapest.
As material costs rise the price you’ll pay is dictated by the market to an extent, but are you sure you can’t find ways to spur your supplier to improve in order to reduce costs elsewhere? For example, reducing quality issues reduces costs and can improve delivery times, too. Listen to this episode of our podcast to learn all about improving suppliers.
If the supplier is a write-off, maybe sourcing a new supplier will help you find one who can offer you better prices and more? If so, there’s no need to fear switching from your current supplier to a new if you’re prepared: How To Switch To A Newer, Better Chinese Manufacturer? [eBook].
We hope this is helpful. Our mission at Sofeast is to help importers have transparency in their supply chain and to give them more control. And this information is critical to have some visibility into your manufacturer’s costing.
By the way, you can always contact us if you have any questions about whether a manufacturer’s quote is reasonable.