Global raw material problems challenge BVS Purchasing
Plants of car manufacturers such as BMW, Opel or Mercedes are or were at a standstill. The construction industry is complaining about extreme price increases for timber. According to a survey by the ifo Institute, 77.4% of industrial companies in Germany reported bottlenecks in the procurement of primary products and raw materials in September. Our purchasing department is also a long way from “normal operations”. Postponements, alternative requests and price adjustments are on the agenda.
Price spiral for metals increases
The price increases for the metals most processed by BVS are considerable. “The price of steel has risen by 157% since the beginning of 2020, the price of aluminum by 142% and aluminum-zinc is practically no longer available at all,” explains Harald Steiner, Managing Director at BVS Blechtechnik. “Raw materials often have to be purchased on an ad-hoc basis when they are available from the supplier and then in large quantities,” Harald Steiner continues. In some cases, this means high stocks of individual materials, for example, we currently have 30 tons of one metal in stock. Whereas other stocks cannot be replenished. We often receive rejections from suppliers just one or two days before the promised delivery date. The service companies’ inventories are practically empty and they are dependent on manufacturers and plants. According to a recent report, no easing is expected for European rolling mills in the first half of 2022.
Silicon price shock worsens aluminum production
According to the latest information, German and European aluminum plants are considering reducing or even stopping the production of aluminum. This in turn is due to a price shock for silicon, which is used as a plasticizer for aluminium alloys. Due to energy problems in China, the production of silicon there has almost come to a standstill. For BVS, this means that aluminum will be even less available in the near future and the price spiral will continue to rise. Due to these circumstances, volume contracts with our suppliers are currently not possible. Conversely, this means that we are unfortunately only able to provide our customers with limited information on prices and delivery conditions.
Material shortages also for preliminary products and standard items
The situation is particularly tricky when demand is short-term and a lot of effort goes into a successful order. However, due to rescheduling of orders, changes to parts, materials or articles must always be managed at short notice. The electronic parts required for complete end devices present us with particular difficulties. The global chip crisis for semiconductors is resulting in very long delivery times. Standard items, connection technology, fans or powder material are also difficult or impossible to deliver. For example, packaging materials or cardboard boxes can take eight to nine weeks to arrive. A certain amount of stock and timely reordering are essential for standard items. The organizational effort in our purchasing department has increased many times over, as alternative requests, postponements and price adjustments in the system have to be dealt with in a continuous loop.
Container prices from China explode
Obtaining raw materials and materials from overseas is quite expensive. Due to port closures in China and bottlenecks on delivery routes, prices for containers from China have risen six to sevenfold. At the beginning of 2020, a standard container from China to Böblingen cost around € 2,500; currently (October 2021) it costs around € 17,000.
Many factors are causing a real storm in the procurement market as a result of the pandemic, including increased demand for a wide range of raw materials, tight transportation routes and scarce production resources around the globe. Our purchasing team continues to utilize all available options and channels and draws on decades of relationships with suppliers to maintain production schedules and deliver the ordered housings and assemblies to our customers.