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Electric shock: Why have electricity prices so skyrocketed?

A sharp rise of hundreds of shekels for a single product, a shortage of mixers and vacuum cleaners and even the low dollar fails to balance the picture.

The prices of electrical appliances soared and forgot November, but there are many logical reasons for this.

With a little luck, in the spring they will return

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• electrical power

David Rosenthal

Thursday, 21 January 2021, 07:44

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If you come to the store now, you will probably find a severe shortage of vacuum cleaners (Photo: ShutterStock)

One channel is closed, and when only one option is used - the costs increase.

Itzik Gabay

In October, Yigal from Ramat Gan purchased a refrigerator from one of the major chains.

Price: NIS 4,900.

A week ago he went to the same store to test another product.

To his amazement, the same refrigerator now costs NIS 6,100.

Not that he has any complaints, of course, but there is also a second side: the vacuum cleaner he wanted to purchase cost 300 shekels more than its price a month earlier, a rise of more than 10 percent.

Oh yeah, it's also out of stock.

These extreme price increases are not a whim of the chains.

"As is well known, the outbreak of the corona virus has caused a global crisis that has not escaped any country in the economic sphere," explains Itzik Gabay, CEO of OIG, "Meanwhile, imports and exports around the world were affected in a way that led to significant market price changes. The electricity.

"There are two main import channels in Israel - one from Europe and the other from the Far East. So far, and unlike the Far Eastern countries, Europe has not recovered from the epidemic. This directly affects world trade. As a result of lack of regular manufacturing activity (due to factory workers). Prolonged closure in the manufacturing countries) and closure of borders in Europe, in fact the Israeli market relied on the import channel from the Far East, mainly China, in a way that affected market prices.At the same time, there was a significant increase in demand for household appliances. "The rise in transport and transportation prices has also been affected by the global changes that have taken place since the outbreak of the corona. The prices of products imported from Europe should not rise significantly, because a fall in the euro exchange rate over the past year compensates for rising commodity prices.

Gabay noted the demand for household appliances.

Excess demand + difficulty in importing produce shortages, as Doron Eliezer, VP of sales at the Israel Electric and Electronics Network, points out: "The shortcomings in the electricity industry are mainly in mixers, breads, food processors, Dyson vacuum cleaners, and speaking of electrical products The big ones have shortcomings especially in ovens and dryers.

The level of demand in the world has risen miraculously and the factories are unable to fill the gaps.

This is compounded by the collapse of the dollar, along with high transportation costs that cause many shortcomings in the electricity industry and other industries. "

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The public loses twice

Mia Cohen, director of finance and trade at Mizrahi Tefahot Bank, explains the shortcomings that Eliezer talks about: "Even products that are not related to medical equipment but to a change in consumer behavior as a result of the crisis have become 'essential products,'" she says. "Bread, mixers, laptops, screens, etc. It was possible to charge more expensive shipping prices because the public was willing to absorb the increase in prices. Their shipping robbed some of the available transport volumes and reduced the available volume for other products."

But wait, what about the dollar?

After all, a low rate is supposed to be good for importers, isn't it?

"Well, it depends," Cohen cools the enthusiasm. The higher the cost of the conveyed product and the smaller its volume, the smaller the effect of the increase in transport prices on its final cost, while the effect of the exchange rate is higher. Diamonds and gemstones, for example, occupy very little volume and therefore the change in transport cost is negligible. "The change in the dollar could be dramatic in the cost of such products."

And since we are looking for a baking oven and not diamonds, here too we will lose.

The low rate does not affect (Photo: PR, PR)

Cancellation of routes and lack of flights - price increase.

Mia Cohen

It's time to dwell a little more on the matter of volumes.

We decided to stay with Cohen for another lesson: "The rise in prices and instability in the shipping world is still felt, and is expected to remain so at least until spring 2021. Since the beginning of the epidemic, the air and sea shipping world has been shaken For a jump in shipping prices, for delays in delivery times, for changes in shipping routes, for the cancellation of contracts and for the "blossoming" of various clauses in agreements between shipping companies and customers. "

So how much did the prices go up?

By tens to hundreds of percent, as Cohen notes.

"The dramatic increase was mainly in air freight, but there is also a significant increase in sea freight. To put it bluntly, the prices of sea freight on lines from China to Israel increased by hundreds of percent and from an average price of about $ 1,500 per container, prices reached $ 7,000. "Air changes are even more dramatic and volatile, an increase of hundreds and even thousands of percent in some months. The peak was in April-June, when a lot of medical equipment was flown."

Since the outbreak of the crisis, there has been a 80% decrease in the volume of flights, which has led to a reduction in the supply of space for cargo.

"On most commercial flights, cargo is carried in the belly of the plane, so when the number of flights decreases, there is a severe shortage of supply of aircraft storage space," Cohen continues. " "This requires a significant investment that will only be repaid over time, and in the current conditions of uncertainty and the assumption that this is a change in market conditions for a limited time only. The companies are reluctant to invest in the long term."

Maybe you should just wait

And this is not the end. The waters of sea transport are also turbulent, and not only at the metaphorical level. "The corona crisis has shaken the ship and caused difficult problems in port operations and the entire supply chain, changing and even canceling routes," Cohen told us. "Delays have begun to emerge. Importers or exporters are waiting for cargo that is essential to arrive on time. They cannot take a risk that the cargo will be delayed and are willing to pay the amounts that the carriers demand."

So if you are short of electrical appliances, consider carefully whether it is time to buy. We all remember the November price celebration, which today seems like a distant dream. The good news: In a few months, the situation may change. Another reason to hope that the vaccines will be run not only in Israel, but all over the world.

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