How the Pandemic Continues to Impact Supply and Demand

 

But COVID-19 also had effects that no one predicted or expected, like shortages and increased demand on products ranging from toilet paper and laptops to lumber, appliances and aluminum cans.

 

The Pandemic’s Impact on Supply

 

COVID-19’s impact on supply has been pretty noticeable.

 

Due to social distancing requirements, lockdown/stay-at-home orders, occupancy limits and sick time due to COVID-19 exposure or positive test results, the flow of raw materials and finished goods was slowed or stopped altogether. Production floors and manufacturing processes were interrupted and restricted. This obviously resulted in a reduced ability to produce goods and services at stable prices.

 

Examples can be found in nearly every industry. Because of these constraints, in many cases, supply was down—and demand was up.

The Pandemic’s Impact on Demand

 

The pandemic also clearly impacted demand. The products and services required by consumers and businesses to stay operational changed—literally overnight. Thanks to new behaviors, such as remote teamwork and e-learning, Microsoft CEO Satya Nadella says the company has seen two years’ worth of digital transformation happen in less than two months.

 

Some of this demand was already in motion; other aspects were prompted solely by the pandemic. Some demand increases were temporary while others are here to stay.

 

When economic conditions are unstable, it’s not unusual for consumers and organizations to decelerate technology spending. Interestingly, however, this didn’t happen during the pandemic. In fact, according to EY, 92% of companies chose not to halt technology investments last year.

 

While demand for things like hotel rooms and plane tickets went down during the pandemic, demand for technology and smart devices skyrocketed. Purchases of tablets and webcams soared.  Even demand for smart appliances increased as more than half of consumers reported purchasing at least one smart device during the pandemic, according to Xiaomi, a leader in smart devices.

 

While IoT has been growing steadily over the past few years, it’s set to increase rapidly after the pandemic to enhance customer experiences and boost health and safety. Drones are being relied on for deliveries and surveillance. Smart devices are enabling remote work and online collaboration. Robots are monitoring patients, sanitizing and reducing virus exposure for frontline workers. Gartner reports that, despite the impacts of COVID-19, nearly half of all organizations will increase IoT investments this year.

 

To put it simply: The pandemic led to large increases in technology demand in nearly every industry and proved to be vital to business resilience … which also means that high-performance cabling and connectivity infrastructure is needed to support this reliance on 24/7 technology.

 

Strong demand is expected to continue as lockdowns ease, vaccinations are given and people reconnect with the world around them. Although we may be on the other side of the pandemic, many of us formed habits that aren’t likely to change. Employees will continue to expect the option to work remotely. Schools are pondering ongoing virtual learning. Telehealth is now something that many patients will insist on.

 

The Pandemic’s Impact on Pricing

 

The changes in supply and demand inherently led to price increases across the board for raw materials. These increases have struck every material: copper, lumber, steel and resin, to name just a few.

 

Because of what Belden manufactures, we’re paying close attention to copper prices specifically. Copper is climbing to the highest rates seen in nearly a decade, and it’s not coming down any time soon. It has risen by nearly 90% over the last year.

 

Years ago, a copper shortage or copper price increase may have impacted only a few industries. Today, however, due to reliance on emerging technology like IoT, nearly every industry depends on the same raw materials, including copper. It’s used in wire and cable, electrical equipment and semi-conductors, which can be found in all types of applications.

 

Along with copper price increases, we’re also seeing rising costs for the packaging materials used to ship products (pulp, paper and wood). Add escalating oil prices and driver labor shortages to the mix and it’s easy to see why freight expenses are also on the rise.

 

We think it’s important to be honest about lead times and costs. So, as we continue to monitor the situation, we’ll keep you updated.

 

Do you have questions about how the pandemic is impacting pricing—or how it might impact your work or your projects? We’re happy to share our expertise. Get in touch with a Belden expert here.

 

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