Connectors are the hardware that allows two active devices to communicate by exchanging either current or signals. Emerging developments, which directly impact the connector sector’s dynamics, have resulted in the increased need for high-speed connectors, a trend towards compact and thinner connectors, and the creation of high-power connectors.
Today, you can see the enormous repercussions caused by volatile and unpredictable global markets in manufacturing enterprises. Unanticipated challenges upset supply chains and make it harder for manufacturers to maintain a positive cash flow. These challenges range from increasing energy costs to unpredictable swings in the price of raw materials.
Unfortunately, the prices of many raw materials are likely to continue increasing. This leaves producers with an important decision every business dreads. They must consistently increase their prices while giving buyers less time to confirm quotes in order to remain profitable with the volatile price of raw materials.
Raw Material Cost Increases Affecting Connector Pricing
The Bishop Report tracks raw material costs associated with connector pricing. We’ll be using information from this report to go over a few key insights into the expected cost increases of connectors.
As a weighted average of Gold, Copper, Steel, and Plastic, there was a 36.5 percent increase in costs throughout 2021.
The expenditures associated with gold, copper or brass, steel, and thermoplastics make up 75% of the total material costs for a typical connector. However, the weighted average cost increase of raw materials will not directly track with cost increases for connectors as manufacturers use different compositions of these materials.
The prices of these materials rose 44 percent year-over-year (YOY) in the fourth quarter of 2021 and 38 percent YOY when evaluated by their utilization in connectors. Specifically, price rises in copper, steel, and thermoplastic all increased the cost of connectors. Gold only made up a small portion of the total.
In addition, there were modest sequential cost increases in the fourth quarter of 2021 compared to the third quarter. Steel alone had a strong 9.2 percent increase from the previous quarter. On the other hand, the general trend leveled off in the fourth quarter, and the growth rate in the cost of materials did not continue as steep as it had been earlier in the year. On a sequential basis, there was only a 0.4 percent increase in the weighted total cost of connectors.
Most material cost reductions occurred during the first half of 2020 due to falling demand (except for gold). The price of raw materials skyrocketed in the second part of the year due to increased demand. This increase resulted in significant YOY gains observed in the first and second quarters.
The growth trends in material costs during Q3 and Q4 were lower compared to the first half of 2021. It is anticipated that changes in material costs will also become more moderate moving forward into 2022. However, do not expect the same result for the increase in the costs of final products as manufacturers begin to stabilize.
Gold, copper, brass, steel, thermoplastics, and other connector-making material prices have increased as economies recover from the pandemic. It is predicted that connector companies will raise pricing as deemed necessary for the foreseeable future.