Material Impacts On The Precision Machining Industry - August 2008

Are you enjoying the Olympics? I hope so, because the effects of China’s efforts to clear the air for them have certainly had a measureable effect on the prices for our raw materials here in North America. “According to analysts, China has cut met coke output by 72% to avoid adding more polluting gases to the environment.” China Coke (metallurgical coke is used to refine iron ore to make steel) has increased in price by 215% since January. Steel Scrap is up 114% since January. Get the facts behind the materials impacting your business in the August PMPA Material Impacts Report.

Steel, up 114% since January. Coke up 215% so far this year. Aluminum, up 26% this year hit, $1.50 per pound on Comex July 11th. Copper high grade cathode over $400 in July. Oil, Nickel and Stainless show some softening of price. Five of the seven items we track are up over same month last year (see illustration).

Coke in China is on a tear due to tight supplies of good quality metallurgical (coking) coal and government ordered production cuts to get clean air for the Beijing Olympics. Manufacturing operations are being curtailed both by government mandate to clean the air and by lack of electricity.

The benchmark commodity that we follow, #1 Steel Bundles, Chicago, is no longer tracked due to changes in the way the automakers sell their stamping scrap. Effective with June 2008 data, we are reporting the AMM #1 Busheling, composite price (Chicago, Cleveland, and Pittsburgh) as our indicator for price of steel scrap. It has tracked essentially the same as #1 bundles over the last two years.

At the time of preparation of this report, Republic Engineered Products had announced a $2.50 per cwt, $50 per ton price increase on all wire and Cold Finished Bar products. The North American price of steel continues to be driven by global events including Coke production cutbacks in China, iron ore pricing in Australia and Brazil, and scrap buys by steelmakers in the Middle East.

Closer to home, over 2,000 trucking company bankruptcies were recorded last year in fleets operating five or more trucks. The trend appears to be accelerating as 935 trucking firms filed for bankruptcy in first quarter 2008, according to a report from the Council of Supply Chain Management Professionals. This impacts us in higher costs for freight and lower demand for parts for OTR trucks.

Please see the Analysis of Foreign Currencies prepared by Georgetown Economic Services posted along with this report.

Why don’t prices of metals drop when the price of their raw material constituents decrease? http://en.wikipedia.org/wiki/Oligopoly; Just in time for back to school: http://www.youtube.com/watch?v=5BQPx8SL9F4.

Read the complete Material Impacts Report (PDF format): Material Impacts On The Precision Machining Industry - August 2008.

Get more related information from the July Asian Currency Monitoring Report.

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Material Impacts On The Precision Machining Industry - June 2008

As of June 2008, steel is up 109%, coke is up 105%, aluminum, copper, brass and oil are at record highs. Nickel and stainless show some softening of price. Five of the seven items we track are up over the same month last year. Lead times are extending as inventories are lean and who wants to build inventory in a volatile market? So focusing on understanding what your suppliers can do for you may be the key to your improved performance in the months ahead.