Speaking of Precision Blog

Speaking of Precision

Speaking of Precision is a knowledge preservation and thought leadership blog covering the precision machining industry, its materials and services. With over 36 years of hands on experience in steelmaking, manufacturing, quality, and management, Miles Free (Milo) Director of Industry Research and Technology at PMPA helps answer "How?" "With what?" and occasionally "Really?"

Previous in Blog: Carbon Equivalents and Weldability   Next in Blog: 5 Things To Know About Triangle Effect, Pseudo-Roundness, and Lobing
Close
Close
Close
9 comments

Prices Rise as Manufacturing Recovers

Posted September 07, 2010 1:28 PM by Milo

The prices of all raw materials that we track rose as follows over the past year. Here are some highlights.

  • Aluminum: Up 23% from July 2009.
  • Brass: Up 28% from July 2009.
  • Copper: Up 17% from July 2009.
  • Nickel: Up 70% from July 2009.
  • Stainless: Up 37% from July 2009.
  • Steel, Busheling: Up 51% from July 2009.
  • China Coke, Up 3% from July 2009.

Up some serious double digits over a year ago.

You can download the August Material Impacts report free here

We track these items as they indicate the direction that we will be paying for our raw materials in our precision machining shops for steel, aluminum, brass, and stainless barstock. These items are critical to the manufacture of those materials.

Editor's Note: CR4 would like to thank Milo for sharing this blog entry, which originally appeared here.

Register to Reply

Interested in this topic? By joining CR4 you can "subscribe" to
this discussion and receive notification when new comments are added.

Comments rated to be "almost" Good Answers:

Check out these comments that don't yet have enough votes to be "official" good answers and, if you agree with them, rate them!
Guru
Hobbies - DIY Welding - Don't Know What Made The Old Title Attractive... Popular Science - Weaponology - New Member United States - US - Statue of Liberty - 60 Year Member

Join Date: Apr 2009
Location: Yellowstone Valley, in Big Sky Country
Posts: 6962
Good Answers: 283
#1

Re: Prices Rise as Manufacturing Recovers

09/07/2010 4:09 PM

Wow.

Another instance of 'res ipsa loquitor' eh?

Add to the escalating (still escalating) material prices: energy, raw and finished goods transportation, consumables, packaging, employee health insurances, taxes...

I have a headache.

Oh, and medicines, tooling upgrades, employee attrition, company vehicle compliance upgrades, inventory shrinkage...

Milo, is there any relief for any of us in sight? I know that it is what it is, but I cannot tell my customers that for another ten years. However, whenever a customer leaves (stating it is a price issue) they usually return, telling me the competition is as expensive as I am, and we mess up less than they do.

Hardly the endorsement I would hope for, but I will take what I can get. As we have discussed, 'Roma die uno non aedificata est'. (Rome was not built in a day)

__________________
When you come to a fork in the road, take it. (Yogiism)
Register to Reply
Guru

Join Date: Oct 2008
Posts: 42294
Good Answers: 1663
#2
In reply to #1

Re: Prices Rise as Manufacturing Recovers

09/07/2010 7:34 PM

So much for any hope of prosperity for us working fools.

That Milo's a handsome rascal, ain't he?

Register to Reply
Guru

Join Date: Jul 2006
Location: "Dancing over the abyss."
Posts: 4884
Good Answers: 243
#7
In reply to #1

Re: Prices Rise as Manufacturing Recovers

09/08/2010 4:31 PM

Doorman, DcaD, and members,

Sadly, the US steel business is no longer a meaningful barometer of the US domestic economy (or actually it is if you've seen the graph of manufacturing jobs as a percentage of employment).

Because of trade flows in and out of the country and the small size of the US steel market relative to that of the world, the US economy isn't a good indictor for US Steel industry either.

I visited China in 2003, and at that time was convinced that the center of graviity for steel and most commodities had shifted to there based on the latent and pent up demand for modern quality of life goods in China.. (IE, If they are to get to a de minimus standard of quality of life, how much steel, stainless steel, and aluminum will they consume? How many pots, pans, McDonalds counters, pipes for indoor plumbing, etc.?)

Since China right now consumes around half of all steel in the world, we think that we (US/North Americans) will continue to be whipsawed by their demand- and China Government policymaking and market diktat!!! More so than by our own supply demand factors here in North America.

This decoupling of prices and availability in North America from our North American supply and demand factors (ie our factors will be swamped by the magnitude of those in Cina and Asia.) will continue to drive pricing strength in the US steel market, regardless of our economic woes. So I expect prices to rise on good news here, and I expect prices to rise on bad news here, since the real determinant is demand in China, and that is not much reflective of US manufacturing factors or our news.

Thats my 2 cents.

What will it take to lower prices significantly?

The China real estate bubble to burst.

The govt there is not likely to let that happen. And they have lots of our bucks to keep it at high psi...

Milo

__________________
People say between two opposed opinions the truth lies in the middle. Not at all! Between them lies the problem, what is unseeable,eternally active life, contemplated in repose. Goethe
Register to Reply Score 1 for Good Answer
Guru

Join Date: Aug 2007
Location: Columbia City, Indiana, USA
Posts: 832
Good Answers: 96
#3

Re: Prices Rise as Manufacturing Recovers

09/07/2010 10:54 PM

Hi Milo,

Actually, the problem is deeper with wider ramifications than just the commodity costs.

During this recession (I know, many debate what to call it, but I think the categorization fits), many of the suppliers of goods and services shrank dramatically, and all were impacted by their own cash-flow issues. Now, when there is an increased demand, they are challenged because they, themselves, have difficulty getting their 'raw materials', and they lack the staff to make goods or provide services. The end result, at least at my place in the 'food chain', is that lead times are extended (what was once 30 days is now 65 days or longer), because my supplier doesn't stock their 'raw materials', costs are higher (not just because of the commodity prices, but because my supplier's costs are higher to procure and produce), and, sadly, often the quality is lower, because many suppliers are now operating with fewer and less qualified staff.

The net-net for me is, I have to often pay cash-up-front for my goods AND the costs of those goods are higher, and I have to wait much longer to receive them AND when received they may not be of usable quality.

My customers are not happy, and because of the higher costs and delays in delivery, their sales are affected.

It is financial entropy, and although I am not an economist, I think it will take a long time to see any significant improvement.

Kind regards (also sad and worried regards) ...

__________________
"Just when I had all the answers, they changed all the questions"
Register to Reply Score 1 for Good Answer
Guru
Canada - Member - Specialized in power electronics

Join Date: Feb 2008
Location: Montreal, Canada.
Posts: 1355
Good Answers: 80
#6
In reply to #3

Re: Prices Rise as Manufacturing Recovers

09/08/2010 10:50 AM

"It is financial entropy, and although I am not an economist, I think it will take a long time to see any significant improvement"

Thanks god you are not an economist. The vast majority of them don't have any idea about what is going on. They were happily driving us into this mess and telling the politicians that they were doing a good job. "Deficits don't matter" they used to say...

Welcome to the "no inflation" society as per gov statistics...

__________________
Experienced is earned, common sense is taught, both are rare essentials of life.
Register to Reply
Guru

Join Date: Aug 2007
Location: Columbia City, Indiana, USA
Posts: 832
Good Answers: 96
#8
In reply to #6

Re: Prices Rise as Manufacturing Recovers

09/08/2010 9:00 PM

Hi Marcot,

Similar to the "no inflation society", we have this sick internal joke that, sooner or later we will have 100% yield and zero defects ... of course that's because we have zero production.

It is a very "slippery slide" we're on ...

__________________
"Just when I had all the answers, they changed all the questions"
Register to Reply Off Topic (Score 4)
Guru
Engineering Fields - Electromechanical Engineering - Technical Services Manager Canada - Member - Army brat Popular Science - Cosmology - What is Time and what is Energy? Technical Fields - Architecture - Draftsperson Hobbies - RC Aircraft - New Member

Join Date: Sep 2006
Location: Clive, Alberta, Canada
Posts: 5907
Good Answers: 204
#4

Re: Prices Rise as Manufacturing Recovers

09/08/2010 12:00 AM

No mysteries here. As soon as the governmental leaders start printing an extra trillion or so dollars (starting in nov 08), this 'appearance of rising prices' was a certainty. I'm just surprised that it hasn't happened sooner. (ref)

As somebody must pay... (that's us), it is only a matter of time til the bill comes.

Its a hamster wheel.. but our owners are spinning the wheel, we must work faster and faster just to stay even.

Chris

Register to Reply
Anonymous Poster
#5

Re: Prices Rise as Manufacturing Recovers

09/08/2010 1:03 AM

Prices are rising; however, it's not because of increased demand (unemployment is still around 10 percent). It's because of the increase in the supply of dollars, each one is worth less, making a commodity, which used to cost X dollars, now costs 2X dollars for the same amount. This is called inflation, which, if the U. S. is not very careful, will start to run-away; just like a speeding freight train.

At this point-in-time, casting blame is not the answer. We are so far under, right now, that we could fire every civil servant, cancel every program, and still not have enough to pay the National Debt.

In post WWII Germany, inflation was so high that workers had to get paid twice a day just to buy the day's supplies. It cost 100,000 DM to buy a loaf of bread.

Just marvel at it. $100,000 for a gallon of fuel.

Register to Reply
Guru
Hobbies - Fishing - New Member

Join Date: Jun 2008
Location: Raleigh, NC USA
Posts: 13529
Good Answers: 467
#9

Re: Prices Rise as Manufacturing Recovers

09/10/2010 7:14 AM

I just read an article in regard to raw materials. And, I have to give credit, where credit is due.

China is spending 10's of billions of dollars out of its 2.7 trillion dollar reserve on infrastructure all over Africa.

This is a very shrewd move. They are not purchasing any land, but are building roads, schools, hospitals, refineries, etc. All of this is being done with imported Chinese labor.

What do they get out of this? Guaranteed access to all raw materials in these heavily invested areas for the next 20-30 years.

Without getting into the morality of this practice, it's brilliant.

The local economies will not get any substantial benefit, other than what's being invested now. By not outright buying land, the Chinese can strip these areas of their raw materials over the coming decades, and simply walk away when they are gone. Guaranteeing themselves low cost raw materials for the foreseeable future.

At least one country is investing in its economic future, unlike some others that I know.

Can anybody say, one world super power? It may be coming.

__________________
Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety. Ben Franklin
Register to Reply
Register to Reply 9 comments
Interested in this topic? By joining CR4 you can "subscribe" to
this discussion and receive notification when new comments are added.

Comments rated to be "almost" Good Answers:

Check out these comments that don't yet have enough votes to be "official" good answers and, if you agree with them, rate them!
Copy to Clipboard

Users who posted comments:

Anonymous Poster (1); chrisg288 (1); DCaD (2); Doorman (1); kramarat (1); lyn (1); marcot (1); Milo (1)

Previous in Blog: Carbon Equivalents and Weldability   Next in Blog: 5 Things To Know About Triangle Effect, Pseudo-Roundness, and Lobing

Advertisement