(Photo: © Petr Jilek)
April 2022
Just a moment ago, we thought that the pandemic and the omnipresent climate crisis had led to the greatest possible distortions on the energy and raw materials markets and that the situation would soon ease.
Now the invasion of the Ukraine by the Russian army has taught us otherwise.
A commentary by Birgit Zaunegger
Overnight, two of the main suppliers for pig iron and some other metals, among others, have collapsed. The lift industry, whose product consists of about 80 percent metal products, has been particularly hard hit. In Germany at least, it has become heavily dependent on Russia for raw materials and energy.
Component manufacturers have already been feeling the effects of significant price increases for metal and energy since the middle of last year. Market participants within the industry who have not used flexible inflation surcharges to date have introduced it in the course of 2021, or March 2022 at the latest.
Since the start of the war in Ukraine and the sanctions imposed by the EU, there have been inflation surcharges at increasingly shorter intervals. Last year, these surcharges were mostly quarterly, but now adjustments are made monthly, and in some cases even weekly.
With regard to the starting product gray iron (used for engine housings, traction sheaves and rope sheaves, among other things), the relevance of starting products from Russia and Ukraine is clearly visible. According to publications by the German Foundry Industry Association, both countries account for a significant share of German pig iron imports.
Total demand cannot be covered by alternative export countries such as Brazil, South Africa or Norway. Availability is therefore severely limited.
The situation is no different for other metals. The price of nickel, for example, has more than doubled since the beginning of the war. The massive intervention of a few speculators on the metal exchanges has further multiplied the price increases.
The significantly lower availability is not only leading to substantial price increases on the part of suppliers, but also to considerably longer delivery times for starting materials in all sectors. An analogous development can be observed in the case of plastics, the main component of which is crude oil. The shortage of fossil fuels, and the resulting increase in their price, are also contributing to the rise in the price of the required starting materials.
At present, it is inevitable for component manufacturers to pass on these price increases to lift companies. While corporate groups may still be able to "absorb" the price increases, small and medium-sized companies in the sector cannot do so without further ado.
Whereas lift companies have not yet been able to implement the contracts they signed before Corona for major projects, they are now bound by contractually agreed prices and on the other hand have to purchase components at significantly higher prices. The consequences are foreseeable.
In addition, two important markets have collapsed for some component manufacturers. In recent years, there has been a noticeable rapprochement of Eastern Europe to the European lift market, exports to Russia could be made partly directly, partly via the Baltic states.
The further development of the industry will probably be followed with interest. One conclusion is already clear: War means loss for everyone. There are no winners.
The author is CFO and authorized signatory at a German components manufacturer, Rudolf Fuka GmbH.
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