Material Impacts On The Precision Machining Industry - December 2009
Prices for most raw materials used to make precision parts have double-digit increases for the year ending December 31, 2009. Surcharges, price increases, and short supplies of even common items characterize today’s market. Until larger inventories of scrap build up from increases in production, the industry and its supply chain face a paradox of no scrap from which to make steel, therefore no steel to make parts, therefore, no scrap to make steel… Copper and brass has doubled over the year. Aluminum is up over 40%. We anticipate spikes in surcharges, allocation, and long lead times throughout the first quarter of 2010.
The prices of the raw materials that we track rose as follows this calendar
- Aluminum: Up 44% from Dec 2008
- Copper: Up 112% from Dec 2008
- Nickel: Up 27% from Dec 2008
- Steel, Busheling: Up 35% from Dec 2008
- China Coke: Up 60% from Dec 2008
We expect to see continued increases as rate of growth in demand continues to outstrip the low inventory levels at suppliers. We believe that surcharges have become a permanent feature in the market for raw materials used in our industry. Shops offering fixed prices for their products do so at their own peril. We hear of “April” lead times being quoted for some steel items. The backlogs we hear about in steel lead us to believe that some tacit ‘allocation’ might be occurring.
The Institute of Supply Management reports economic activity in the manufacturing sector expanded in December for the fifth consecutive month, and the overall economy grew for the eighth consecutive month. Right on its heels due to low inventories--price increases for raw materials!
Read the complete December 2009 Material Impacts Report (PDF format) here.