As we saw our standard cast brake drum (our part number16792X) price increase by approximately 100% over the year, we wondered how much higher it could go? In January, we thought maybe we saw some pricing stability. Fast forward a few months later to March, and pricing is moving upwards again. Let’s look at why:
- Meritor – In January, Meritor announced that it would be leaving the aftermarket for brake drums due to supply issues. It is still uncertain whether their supply of castings will go to another US manufacturer of drums or if it will go to other products and thus further reduce the supply of drums. If the capacity does go to another US manufacturer, do they have the machining capacity at the moment?
- Webb – In March, Webb announced that pricing would be going up another 7% and lead times going to approximately 20 weeks, thus further constraining supply.
- Chinese New Year – China always has its Spring Festival/New Year in February, and most manufacturing and shipping shuts down during that time. That further reduces supply. Secondly, in anticipation of their Spring Festival, orders and shipments jump before and afterward, increasing overseas shipping costs.
- Freight prices – As you may know, DuraBrake manufactures much of its products in Turkey. Ocean freight from Turkey is increasing because the largest ocean freight line decided to stop taking shipments for a while, increasing ocean freight prices.
- Ukraine invasion – A large amount of the pig iron and steel used in production in Turkey comes from Russia and Ukraine. In addition, gas for transportation and energy prices for production are expected to increase with the world beginning to boycott exports from Russia. Since the most significant costs in brake drum and brake rotor production are energy costs and iron/steel costs, expect these costs to continue to increase prices significantly if Russia’s activities in Ukraine continue.
- Western port strikes – In July 2022, the International Longshore and Warehouse Union contract will expire with 29 ports in California, Oregon, and Washington. Given the chaos at the ports last year, we expect the employees to strike if they don’t get a significant pay increase. If employees strike, it will further increase the backlog of ships being unloaded. Considerable pay increases are likely to increase shipping costs as well.
- Canadian Rail strikes – A labor dispute between the Teamsters Canada Rail Conference and Canadian Pacific Railway has haltedrail operationsfrom the Canadian ports on the Pacific. This will further disrupt the delivery of goods in Canada and cause further congestion at those ports.
The above reasons currently have and will likely continue to impact brake drum (and rotor) pricing. However, it is essential to remember that minor improvements in supply or slight decreases in worldwide demand could profoundly impact product pricing, so it remainsnecessary to be cautious. Happy 2022Everyone!:)