Japanese manufacturers raised the price by 10%, but the mismatch between supply and demand of aluminum electrolytic capacitors is still as high as 1:5

Price increase! Still price increase! At the beginning of 2022, aluminum electrolytic capacitors continued the price increase trend of last year. Previously, Nichicon, a major Japanese aluminum electrolytic capacitor manufacturer, said that it had increased the price of all products by 10% in mid-April.

According to the author's tracking statistics, in 2021, global aluminum electrolytic capacitor manufacturers carried out at least four rounds of price increases, and each price increase was about 10%. The reasons for the price increase are nothing more than rising costs and strong demand.

Although only Nichicon announced a price increase this time and no other manufacturers have followed suit, based on past experience, the first shot has been fired and it is only a matter of time before the other companies follow suit.

Raw materials prices soared again, and aluminum electrolytic capacitors were forced to increase prices

Not long ago, Taiwanese media reported that Nichicon, a major Japanese aluminum electrolytic capacitor manufacturer, had raised prices of all its products by 10% in mid-April to reflect the skyrocketing costs of various products.

Kaimei said that it has been in continuous talks with its customers; Lelon Electronics has almost reached an agreement with its customers, but will first observe whether the Japanese manufacturers have successfully raised prices, and then make a decision based on market conditions. It will not follow suit immediately; Kingsoft Electronics just raised prices in the fourth quarter of last year, so it is impossible for it to increase prices every quarter; Yubang has no price increase actions or plans.

According to the author's understanding, aluminum electrolytic capacitors have continued to rise in price since the end of 2020, and major manufacturers have carried out at least four rounds of price increases last year. Unexpectedly, this trend has continued into 2022, and if the raw material side cannot be alleviated, the sentiment of price increases may continue to spread.

It is worth mentioning that Jiwei.com has reported that since December 1 last year, Nippon Chemi-Con, a leading Japanese aluminum electrolytic capacitor manufacturer, has successfully raised the contract price of aluminum capacitors for a first-tier power supply manufacturer in Taiwan by 10%.

Data shows that the market competition pattern in the field of aluminum electrolytic capacitors is highly concentrated. Japanese manufacturers have long occupied a dominant position, with CR5 exceeding 60%. Major companies include Nichicon, Jiamei and Rubycon mentioned above. In addition, Jianghai Co., Ltd. and Aihua Group in mainland China and Kaimei, Lelon Electronics and Jinshan Electronics in Taiwan also have a certain market share.

As we all know, in highly concentrated segments, leading companies often have a stronger voice and bargaining power to pass on costs to downstream companies. Therefore, when Nichicon once again feels the pressure of rising costs from the raw material side, they will naturally choose to pass on the costs to downstream companies. Once a manufacturer opens the Pandora's box of price increases, the momentum cannot be stopped unless the industry changes and demand weakens.

However, from the current situation, although the demand for aluminum electrolytic capacitors in downstream consumer electronics, home appliances and other fields is average, the demand in emerging fields such as photovoltaics, energy storage, and new energy vehicles continues to be strong. Therefore, with the booming downstream and the rising prices of upstream raw materials, aluminum electrolytic capacitor manufacturers will naturally raise prices to transfer costs.

Specifically, regarding the reasons for the price increase, Nichicon stated that, on the one hand, global consumer market demand has gradually improved, aluminum electrolytic capacitors continue to be in short supply, and the company is adding equipment to expand production capacity; on the other hand, the prices of upstream materials such as aluminum foil and chemical foil have repeatedly hit historical highs, and logistics costs have risen sharply, and the company can no longer bear the cost pressure.

The author learned that in terms of raw materials, due to the impact of the Russia-Ukraine conflict, LME aluminum continued to soar and hit an all-time high on March 7. Although it has since fallen back, it is still at a high level and is still much higher than last year's highest point. As of May 27, LME aluminum was quoted at US$2,884 per ton.

In addition, since aluminum capacitors need to go through an electroplating process, major manufacturers send aluminum capacitors to countries with relatively low electricity costs such as mainland China for electroplating, and then ship them back to the original factory to complete the next process. In addition, aluminum capacitors are relatively large in size, so the transportation cost is relatively high. As we all know, since the outbreak of the epidemic, shipping costs have continued to soar, and there is a shortage of containers. Therefore, manufacturers are under great pressure from transportation costs.

The economic boom continues to rise, with a supply-demand mismatch of 1:5

As the downstream demand for aluminum electrolytic capacitors remains strong, this also gives aluminum electrolytic capacitor manufacturers the confidence to raise prices. According to Aiwa Group, the downstream industries of aluminum electrolytic capacitors mainly include industrial power supply and lighting, new energy and automotive industrial power supply, electronics and other industries. At present, the lighting market is basically stable; the demand for industrial control, new energy, photovoltaics, and automobiles has increased sharply.

Coincidentally, Jianghai also mentioned in its annual report that from the perspective of downstream applications, demand growth in new energy, industrial control and other fields is the strongest, and 7 of the top 10 global photovoltaic inverter manufacturers have become the company's users, and the market share in this segment has reached 15% of its operating income. Moreover, emerging markets and users have emerged one after another, and the top 10 users ranked by sales revenue account for 35.2% of total revenue.

In addition, a person from the securities department of Jianghai Co., Ltd. told the author that the demand in the two fields of photovoltaics and new energy vehicles has always been strong, especially the photovoltaic market, which has become one of the important sources of our industrial expansion and performance growth. In our view, the demand in the photovoltaic market is not only strong this year, but in the next few years, under the background of "dual carbon", the demand will be diversified, and this high prosperity will continue.

"Under the current policies and environment, we believe that the demand for photovoltaics will remain relatively good," the person from Jianghai Co., Ltd.'s securities department added.

When interviewed, Aihua Group said: "The company's capacity expansion in 2021 is to prepare for market demand in the past two years, mainly focusing on photovoltaics, new energy and automobile fields."

At present, due to the strong demand, the above two companies have made huge profits. In the first quarter of this year, Jianghai Co., Ltd. achieved a revenue of 981 million yuan, a year-on-year increase of 31.20%; the net profit attributable to shareholders of the listed company was 118 million yuan, a year-on-year increase of 42.23%.

Perhaps due to the rising prices of raw materials and the lag period for the price increase to be transmitted to the downstream, Aiwa Group's first-quarter performance was slightly worse. The company achieved revenue of 869 million yuan, a year-on-year increase of 28.95%, and net profit of 115 million yuan, a year-on-year increase of only 1.85%.

In comparison, Jianghai Co., Ltd. has gotten rid of the influence of raw materials and smoothly transmitted prices to downstream, while Aiwa Group is still suffering from interference.

At the same time, the aforementioned Jianghai insider revealed to the author that the company currently has a lot of orders. Although the supply and demand have improved compared to the end of last year, the supply-demand ratio is still as high as 1:5, and under normal circumstances, the delivery cycle is two to three weeks.