Changes ahead in the LED market

Changes ahead in the LED market

Changes ahead in the LED market

With exception of the domestic LED market (light bulbs), the other parts of the light (bells, projectors, street lighting, etc.) are, for the most part, made of aluminium. This means that fluctuations in the price of this material greatly affect production costs for professional LED lighting.

Another key element which determines production costs for LED lighting is the behaviour of the US Dollar (USD) on the stock markets. This is due to two factors:

Firstly. The currency rate used for aluminium on financial markets is the USD. If the USD is devalued, less aluminium can be bought for the same amount of dollars.

Secondly. The main producer and exporter of LED lighting in the world is China. The benchmark currency used (which Chinese factories are paid in when they export) is the USD. If they are paid in USD and the USD is devalued, each time material is bought they will be able to buy less material, and whenever they change USD into the local currency, the Chinese Yuan (CNY), , to pay salaries, rents, etc., they have less CNY, resulting in a fall in their profits.

 This means that, if the price of aluminium rises and the value of the USD drops, LED lighting production costs rise.

So, what is happening with Aluminium and the USD?

The continued regulation by China of its aluminium industry has a far-reaching impact on the main manufacturers’ share prices , leading to a tighter global market and an increase in prices.

At the beginning August, Aluminium broke all barriers and reached over 2000 points on the stock markets, consolidating a rise of 18.97% from the beginning of the year.

Experts believe that the trend will continue upwards, so it is expected that prices will also continue to rise.

US Dollar (USD)
The US dollar has continued to show weakness this year, particularly from June onwards.

The exchange rate from U.S. Dollars (USD) to Chinese Yuan (CNY) dropped 4.3%, from 6.9640 from the beginning of the year, to 6.6636 in August. In other words, for each sale made by a Chinese company paid in US dollars, their profit was 4.3% lower.

As a result, current production margins, the upward trend in the cost of materials like aluminium and the devaluation of the U.S. Dollar make it foreseeable that LED lighting will undergo price increases on the international markets in the final part of the year.

Carlos Caballero Ramajo
CEO Ilumia