Lamp prices surge as China restricts raw materials

Pennie Varvarides
The cost of fluorescents is skyrocketing this month as China limits the export of essential raw materials

The price of T5s, T8s and CFLs is soaring by an average of 30 per cent as key components, known as rare earth elements, become increasingly difficult to obtain.

China, which is currently responsible for mining around 97 per cent of the world’s 17 rare earths, is restricting exports to boost local manufacturers.

World demand is expected to hit 180,000 tons per year in 2012, while world supply is likely to be less than 160,000 tons. In 2010, China set its export quota at 30,000 tons.

‘We’re at the mercy of the Chinese and their supply of phosphor,’ says Gerry Knowles of distributor General Lamps. ‘These increases are brutal – and they’re not consistent. Prices are going to get too high for the market to stomach. And I don’t see an end to it any time soon.’

The European Lamp Industry expressed concern for the development of future technologies impeded by the restrictions and called upon the European Commission to fight the trend.

Fluorescents need up to five different rare earths to create white light. These raw materials make up 85 per cent of the phosphors used in the lamps.

Paul Reading, CP Lighting chief, told Lux that between May and September the cost of fluorescents rose by 70 per cent.

On 1 September, Philips increased its linear fluorescent prices by up to 38 per cent and its CFLs by up to 25 per cent. On the same day, Osram declared monthly price increases ‘until the cost of rare earth materials are stabilised.’

'These increases are brutal - and they're going to get too high for the market to stomach' Garry Knowles

GE warned: ‘We will do our best to manage these costs where we can, but rises on a similar scale to those seen in recent months will mean further significant price adjustments may be unavoidable.’

To put the increase into perspective, GE noted: ‘If rare earths were coffee, a latte-to-go that cost £1.30 just a few months ago would now cost almost £14.’

GE and Havells-Sylvania fluorescent prices are believed to rise by around 30 per cent. However, Megaman – whose main factory is in Xiamen, China – released a statement saying it had secured significant phosphor stocks and will be holding its prices until 31 December.

‘I think a certain amount of profiteering is going on,’ said Reading. ‘Prices shouldn’t be going up by as much as they are. The amount of these materials used in a particular item isn’t necessarily proportionate to the increase.

‘But things will balance out. There will be a realignment as competition grows between manufacturers.’

CP Lighting’s prices have risen approximately 40 per cent, in line with the inflation. Knowles said: ‘[General Lamps] has to pass these increases on to our customers. We have to, there’s no option.

‘Brands are going to raise prices so much, that customers are going to stop caring whose lamps they’re using. I’ve seen wholesalers in America stocking own-brand products and selling them for a fraction of the price. That’s what’s going to happen here.’

‘My customers’ stores here in the UK are increasingly full of unbranded lamps. When I questioned them, they say it’s all due to the price hikes.’

Reading added that the cost of lamps has been falling for 20 years and it was only a matter of time before it started going back up again. ‘It’s very difficult to find anything that’s more efficient than fluorescents. This isn’t going to put people off using them.’

With the price increases seriously affecting the industry, Knowles said: ‘With any change in business there is always an opportunity. What this has created is a flood of new unknown brands entering the British market, from organisations taking the opportunity to trade with lower stable prices. This will only grow if things stay as they are.’

Rare earth elements are also used in other products, such as computers, TV screens and medical devices.

Lux Survey

China’s imposed restrictions on the export of necessary rare materials
are forcing manufacturers to push up the price of fl uorescent lamps.
Costs have already risen by around 70 per cent on average since May and companies have warned of further increases to come. 

Osram – 1 September 2011
T8 tubes: 40%
T5 tubes: 20%
CFLs: 10%
Other fluorescents: 20%
This is Osram’s second increase, following one in August.

Philips – 1 September 2011
Tubes: 38%
CFL non-integrated: 25%
CFL integrated: 15%

GE – July 2011
T8 tubes: 30%
CFLs: 20%
GE originally announced lower increases on 10 June of 15 per cent for T8s, 8 per cent for T5s and 1 per cent on CFLs, but changed their minds.

Havells-Sylvania – 25 August
T5 tubes: 35%
T8 tubes: 35%
T12 tubes: 30%
CFL non-integrated: 30%
CFL integrated: 20%
A second increase has been announced for October.

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