Buyers on latest crisis
Staff -- Purchasing, 4/1/2004 2:00:00 AM
"What, me panic?"
PURCHASING asked a panel of steel buyers recently if they were panicking over 30-year highs in prices and tight steel supply, and what they are doing to ensure supply in the second half of 2004. Buyers stopped short of using the P- word, but definitely expressed concerns for the dramatic increases in steel pricing.
"No panic here. Granted, the fundamentals in the steel market point to a tight year. Delphi has some very solid relationships with mills and processors. These relationships have always been our key to success and they will certainly help during 2004. Protecting the customer is Delphi's number one goal and our supplier relationships support this goal. The supply base certainly has constricted. Overall, that is not a concern, as it will help Delphi meet its supplier rationalization goals while ultimately creating a healthier steel industry. Delphi will continue to communicate with potential steel suppliers who meet our criteria in order to ensure adequate, high quality supply to our customers." —Michael Stockton, steel commodity manager, Delphi Corp., Troy, Mich.
"We are not in a panic yet; however, we are very concerned. This crisis has a way to go. The issue is also compounded because domestic service centers are double- or triple-buying from different mills in the hope of getting at least some of their orders filled. This happened during the last steel shortage and once supplies loosened, the mills found a lot of the duplicated orders being cancelled. Prices fell and several warehouses found themselves in trouble with expensive steel. When will this wild ride end? The wild card is if and when China turns off the buying machine. Will it be over in April, or in July, or even January? It is just too early to tell. My guess is this will last late into the third quarter. As for what we will do to ensure a supply during the second half of 2004, we will do what we are currently doing: Communicating and partnering with our customers and suppliers and giving as much advance notice as possible. I trust, and also hope, that our long-term relationships with our primary steel suppliers will continue to yield a sense of loyalty on all fronts." —Bill Fox, purchasing manager, LMC Industries Inc., Arnold, Mo.
"Worthington Steel strongly endorses the Golden Rule philosophy of "treating our suppliers as we would want to be treated" in the good times so we are properly positioned to receive reciprocal support in markets like these. We are certainly concerned about steel shortages, price increases and late deliveries, but would expect to be treated fairly by our suppliers." —James A. Daniell, vice president of steel purchasing, Worthington Steel, Columbus, Ohio.
"Panicked? No. Concerned? Yes. During times like these, the saying, 'You're only as good as your supplier', takes on real meaning. We believe we are partnered with the right suppliers, who will help us weather the storm. Certainly, greater communication between the respective management teams will be required to prevent the storm from growing out of control. Our salespeople are also actively involved in managing this situation. It would be easy now to sell something at the wrong price, but more important, we have to manage inventories such that we have steel available for key accounts." —Jim Sarwark, vice president of purchasing, inventory management, and logistics, McNichols Co., Tampa, Fla.
"Steel availability will be a large issue, especially the entire first half of 2004. Greif is looking at many options to make sure we are well positioned for steel supply in the second half, although much of the strategy is aimed at continued development of existing supplier relationships. The lingering questions that cause us uncertainty are demand in Asia, and raw materials. Therefore, contingency planning will play a more crucial role in the second half of 2004, making sure we have alternate avenues of supply in the event our current supply base puts us on more restricted allocation. Additionally, knowing when this cycle will end will improve our chances of closing the chaotic period with a competitively priced inventory position." —James M. Clowes, purchasing manager for steel, resins, industrial packaging and services, Greif Inc., Delaware, Ohio.
"Availability of our major product lines is very restricted—at least through the first half. This will be a most challenging time for sourcing steel. Rising prices will ultimately attract more supply to the market, but the lag time and pain of the increases will cause serious complications." —Frank Ruane, director of corporate purchasing and materials management, Olympic Steel Inc., Bedford Heights, Ohio.
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