If ever there was a perfect storm for international trade, it has happened over the past two years. Global supply chains have been hammered first by the pandemic, then by a container ship blocking the Suez Canal, and most recently by staffing shortages worldwide.
The steel and aluminum industries have been particularly hard hit, and there is no end in sight. It is far more difficult and costs a lot more to move any kind of material worldwide. Secondary industries that rely on steel and aluminum tubing and other products have faced, at times, weekly price fluctuations. They have also had to contend with significantly extended lead times and product shortages.
Available OptionsThere are several ways in which this has affected industries that produce steel light poles and aluminum light poles. Let’s take a closer look.
1. Raw Material Cost
While the supply of metals has been significantly decreased over the past two years, the demand has not changed. This means that when it comes to raw materials, it’s been very much a seller’s market. Raw material suppliers have not only had to pass on increased prices to their customers, but they have also been charging a premium based on limited stock.
2. Stock Holding
Due to materials shortages and price fluctuations, manufacturers of steel light poles and aluminum light poles have had to change their approach to stocking inventory.
Those that could purchase raw materials in bulk but that has increased storage costs as well as carrying costs. So even if it insulates them against price fluctuations to a greater degree, it still increases their costs overall.
Manufacturers that are not able to purchase raw materials in large quantities have had to forecast and estimate prices based on historical data. This means their pricing is likely to be significantly higher, as it will have to be based on future purchase costs.
3. Quote Validity
In the steel, aluminum, and metal industries, one approach to these massive changes in pricing and availability has been to limit the validity of quotes to customers.
So, we might once have got a quote that would be valid for 30 days, 60 days, or 90 days; some suppliers are now holding quotes for as little as 10 days. This means if you plan to install metal light poles, you cannot rely on a quote that you received a month or more ago. This makes it harder for contractors and installers of light pole systems to plan ahead.
4. Longer Lead Times
As the challenges in metal supply have intensified, the bottleneck for these items has narrowed. Wholesalers and warehouses throughout North America have lower stock levels than ever before. This means that even raw material suppliers are now waiting for their products to arrive several times longer.
These delays are inevitably passed on to their customers, who in turn pass them on to their clients. So, something that might previously have been available in two to three weeks could now take 6 to 8 weeks or longer. That might not include manufacturing and processing time.
Neither raw material suppliers who purchased in bulk from abroad, nor light pole manufacturers, have any control over these lead times. So, there is no way to predict light pole availability when a customer chooses to place an order.
5. Increased Demand
One of the great paradoxes of the pandemic is why it has slowed down the economy in many ways. It has also spurred governments worldwide to invest heavily in infrastructure and development. North America is no different.
So, while we have been grappling with supply problems and price increases, we have also had to deal with increasing demand for many products. This only serves to further exacerbate the problems with light pole availability.
6. National Shutdowns
Unfortunately, some of the biggest suppliers of metals and metal products globally are also countries hardest hit by national shutdowns. China, India, and other countries in the east supply much of the world’s metal products. So, when their economies were effectively shut down due to the pandemic, it only increased the metal industry’s pinch. This, in turn, has increased the scarcity and availability of light poles and the price that they sell for.
What You Can Do to Improve Lead Times and Planning Options
It’s easy to sympathize with the metals industries’ problems right now, but that doesn’t provide any practical solutions to installers or end-users. Light pole availability is not guaranteed right now and will not be for the foreseeable future. However, there are several things you can do to improve the lead time you can expect and give yourself more planning options.
Get Specifications Changed
Most steel and aluminum light pole manufacturers have a limited selection of standard items. These items are usually kept in stock as they are frequently ordered. This means your chances of purchasing them off the shelf, all within a shorter time frame, are much higher.
Find out which items your preferred suppliers keep in stock or can deliver in the shortest possible time. Then speak to the client or end-user on your project to find out if they’re willing to change the specification to one of those options. Highlight the difference in lead time and the reliability of supply. This might allow you to shorten the time between when you place your order and when you receive your light poles from the supplier.
Order Early
Another workaround for light pole availability is to place your orders as soon as possible. It’s common in the construction and contracting world to hold orders as long as possible. While this is understandable from a cash flow perspective, currently, it is a dangerous gamble. If you wait until the last possible moment to place your order, you might be left waiting on-site with no light poles to install.
Offer Alternatives
Even if you’ve both you and your supplier of steel or aluminum light poles do everything correctly, there’s still a chance that things might go wrong. Light pole availability is anything but assured right now.
If you run into a situation where the light poles you need for a particular project are just not available, ask your supplier to provide a list of potential alternatives. Then approach your customer to discuss which ones might work for their project. It’s not always possible to use an alternative product, but when it is, it could cut costs and time.
Build In a Financial Buffer
When you’re quoting or bidding on any project, it’s natural to try to cut your price as much as possible. If the project includes the installation of light poles right now, this is not a good strategy. Metal prices have been increasing by as much as double-digit percentages every month. There’s a good chance that if you use today’s price for a job installed in a month or two, you will cut your profits significantly.
When you are pricing projects that include steel light poles, aluminum light poles, or any other metal materials, it’s a good idea to build in an extra financial buffer.
Bulk Buy
The final strategy we will address to deal with light pole availability and price fluctuations is to buy in bulk. If you regularly install the same type of light poles on your projects, now is the best time to purchase in bulk. Not only can you lock in pricing, but even if your supplier has low stock themselves, you can guarantee that you’ll be at the top of the list when they do restock. Which can keep your installers and crews working, even when shipments are delayed.
No End in Sight
Perhaps the biggest challenge when it comes to light pole availability and any other metal products and construction products is that no one really knows when the current situation will start to ease.
The delays and bottlenecks that have been caused by this once-in-a-lifetime combination of events are likely to take months or even years to normalize. Some of those supply shortages might be addressed through local manufacturing efforts, but it will take time to ramp those up too.
In the meantime, it is virtually impossible for anybody in the light pole industry, or their suppliers, to predict what might happen next. The only thing that is certain right now is that we are in a constant state of uncertainty.
Time will tell if international metal prices stabilize in 2022. But if the past two years are any indication of what we can expect, it’s likely to be a bumpy ride. Hopefully, you now understand more about why prices and availability are so volatile and have a few insights to insulate yourself from these problems.