Dec 7, 2016: Since May 2016, Chinese players have been surging LED package prices, started with Epistar’s distributor in China, Luxlite, which announced a surge in LED package prices, citing a number of reasons for the price increase.
Now, Chinese LED chips makers San’an Opto and HC Semitek has also declared hike in LED chip prices. Key LED package makers like Honglitronic, Smalit, Xuyu Optoelectronics, and Samsung will also increase prices this week.
Reasons behind the hike
Hike in raw material: The Chinese manufacturers have cited the reasons for this hike to be rise in costs of raw materials like circuit board, PVC, plastic, gold thread, aluminium, etc, as well as hike in paper packaging and shipment prices.
According to a report, in Q4 2016, PVC price was raised by 60%, plastic price by 30%, alluminum price by 30%, paper packaging price by 30%, and shipment cost by 33.6%. This price hike trend is expected to continue even through the first quarter of 2017.
Freight price hike: Another reason for LED price hike is increased freight cost due to strict regulation enforcement. Since September 21, 2016, a new standard for over-limit highway transport vehicles has been in effect. Now logistic companies cannot over load trucks to keep transportation cost down. Since the new rule is implemented, heavy penalties are being slapped on the logistic companies. As a result, raw material prices have been hit due to the increase in transportation costs.
It is reported that ocean freight rate has also increased in December 2016, from recent all-time lows. French shipping company CMA CGM has already announced price rise on its services. Fees has been increased to US$1450 per GP, US$2800 per HC from December 1, 2016. Swiss company MSC also announced price rise on its service from December 1, 2016.
Rise in carton price: Many Chinese carton companies have increased the price of cartons as prices of corrugated board and packaging paper have also gone up.
Manpower shortage: Labor costs in China has increased by about 9% this year. A report stated that now younger people in China choose not to work on the assembly line, as a result, many companies have been forced to raise wages to attract workers.