Nieuwsfiets.nu notes that the raw material prices of aluminum have risen to their highest level in 10 years. On top of that, energy prices are increasing. With the bicycle industry heavily reliant on aluminum, will there be knock on effects?
Thanks to a high demand for aluminium, some environmental factors, and the continued impact on logistics and labour of the coronavirus pandemic, the London Metal Exchange price for aluminium has in a number of months crept up from €1.31 to €2.26 per kg. This price level is not expected to fall in the near term.
This is compounded by high energy prices. Niewfiets.nu takes an example from the Netherlands, in smelter Aldel, who has recently had to move to reduced production. The price for a megawatt-hour of gas has risen to €300, compared to before the corona crisis when that price was about €20. The production of a ton of aluminium therefore costs Aldel €4,500 in electricity costs, while the market price for a ton of aluminium is currently €2,500. is. Aldel is of course not the only aluminium smelter facing this.
Such a situation is already having an impact on manufacturing, and the article considers how this might impact product prices in the bicycle industry, where many frames and components are made of aluminium. With a boom in product demand, and climbing container prices, Niewfiets.nu reached out to the industry to ask if they believe the market suffer another price increase. The replies were few, with the Chinese contacts being the most responsive. There is word that raw frame tube prices have already doubled since April and that this will be noticeable in the market.
As winter progresses, high energy prices will be more keenly felt. It has also been reported that some factories in China, including those in the bike trade, have experienced shutdowns due to electricity shortages. This will be felt down the line in lead times and availability of components.
The publisher mentions that the price increases of the raw materials will have a limited effect on the final price of bicycles. It is the very high prices of container transport that has the greatest current influence. Ultimately, the combination of all these factors means that bicycle manufacturing is certainly facing a cost squeeze.