Factors Affecting Product Cost
Staff -- Purchasing, 3/4/2004 2:00:00 AM
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New York copper cathode has soared by 40¢/lb since December but pricetags could go up, down or sideways. Some analysts have said fundamentals are aligned for a bull market in the red metal, with world refined supplies falling, Chinese metal demand growing and a sickly dollar making the metal cheaper in many key overseas markets. Some analysts say prices are vulnerable to speculators cashing in on gains after weeks of staggering increases.
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Wall Street analysts now expect the world aluminum ingot price for 2004 to spike to 74¢/lb from 65¢ in 2003, as supply doesn't match the demand pickup due to an intensifying shortage of alumina, its raw material.
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Substantial price hikes for ethylene could be triggered in coming months because no new capacity is due to come on-stream until 2005, suggests analyst Paul Bjacek at SRI Consulting. Ethylene is a basic feedstock used to produce petrochemicals and provides analysts with a benchmark for overall demand. He expects global ethylene use to rise to 160 million metric tons in 2012 from 100 million metric tons in 2003.
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International Energy Agency has renewed warnings of potential oil price volatility because of worsening winter weather and diminishing inventories in such industrialized countries as the U.S. Crude oil prices averaged $34/barrel this quarter, the highest level since before the U.S.-led war on Iraq. The Organization of Petroleum Exporting Countries may cut production again in March if prices fall from recent highs.
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Upward pressure on ocean freight rates is evident, says Robert Fay at Canaccord Capital, because current freighter capacity remains tight on the first legs of the shipments out of North America. In fact, he sees no immediate end to inflationary pressures from higher charter rates and higher inland transportation costs. The outlook for ocean freight demand in 2004 suggests growth of 6-8%, and that should absorb any new freighter capacity coming aboard.
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advocates see higher wireless prices from the $41 billion merger of AT&T Wireless Services into Cingular Wireless. The deal trimming the number of national players from six to five would create a cellular giant with 46 million subscribers. Current market leader Verizon Wireless has 37.5 million. Consumer Federation of America fears the merger could reduce the fierce competition that has driven down prices in the U.S. cellular market.
Crude oil futures settle back at $68/barrel
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