Examining the increased cost of fluorescent lighting products
Since the beginning of 2011, the materials required to manufacture fluorescent lighting products have increased in price, which has subsequently caused the cost of such products to rise.
The cost involved in acquiring rare earth materials has increased because they are not only in short supply around the world, they are in high demand. This is because they play an important role in the construction of highly sought after products such as colour televisions, medical devices and fluorescent lights.
This has directly affected the cost of fluorescent lighting products because the rare earth materials lanthanum, cerium, europium, terbium and yttrium are used to create phosphorus. Phosphorus is an integral component of all fluorescent lighting products.
In particular, linear fluorescent (TL), compact fluorescent integrated (CFLi) and compact fluorescent non–integrated (CFLni) phosphors are among those experiencing supply shortages.
These current supply shortages can be traced back to China, who is responsible for mining and producing 97% of the worlds rare earth materials. There are few rare earth material suppliers apart from China because the cost of mining operations in the nation is low. So low, in fact, that no other nation can compete.
It is no surprise then, that when the nation decided to reduce export quantities and increase taxes on many rare earth materials that companies across a range of industries throughout the world were affected.
According to research conducted by Marc Humphries on behalf of the American Congress, even if China was to continue exporting as its original rate, global demand for the materials would still be higher than rate of supply.
Humphries found that per year, the demand for REO materials is approximately 134,000 tons, while only 124,000 tons are produced. It is expected that this figure will continue to rise each year.
A report compiled by Goldman Sachs & Partners Australia Pty in May 2011 and referred to on Bloomberg has similarly bleak predictions.
“We suspect that export quotas will shrink further [and]…we are of the view that rare earth prices have not yet peaked,” Managing Director, Goldman Sachs, Malcom Southwood explained.
On a more positive note, many analysts predict that the effects of these shortages will be less prominent by 2013-2015 as new rare earth material mining sites are created. This would mean that the cost of fluorescent lighting products would decrease, making them more affordable for consumers.