Factors Affecting Product Cost
Staff -- Purchasing, 2/19/2004 2:00:00 AM
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Average selling prices of integrated circuits are expected to start turning, says Keith Jackson, president of ON Semiconductor. IC prices dropped 3% in the fourth quarter of 2003, but the new year has brought about a stronger pricing environment due to broad-based strength in customer orders. The Phoenix-based chipmaker expects a 2.5-3% rebound in IC market prices in the first quarter of 2004.
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Analyst Greg Barnes has raised Canaccord Capital's 2004 forecast copper price to $1.10/lb, endorsing the recent runup in expectations by such producers as Phelps Dodge. Barnes anticipates "sharp improvement in demand, as rebounding economies in the U.S. and Europe add to soaring demand in China." The latest consensus world copper price forecast now is $1/lb, compared to 81¢ in 2003.
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Market prices for corrugated and solid fiber boxes have fallen for two years, and even producer Smurfit-Stone expects containerboard and corrugated box pricing to be lower in the first half. Smurfit-Stone's chief executive, Patrick Moore, admits that first quarter price increases really won't affect the market until the second half of the year. The firm raised containerboard prices $40/ton on Feb. 15, and has set corrugated container price increases of 8% for March 15.
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Talley Metals Technology is trying to boost transaction prices 3% on 300- and 400-series stainless steel bars in round, hexagon and square shapes. Talley also is changing its surcharge mechanism on stainless bar products to an 18¢/lb premium over the previous month's world price for nickel.
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Commercial tissue products could cost more soon if fluff pulp prices continue to rise, says Thomas Falk, chief executive of Kimberly-Clark Corp. Fluff pulp averaged $610/metric ton in 2003, an increase of 5% from the 2002 average of $580. Kimberly-Clark expects the price of this grade pulp, a key raw material in tissue paper products, to rise about 5% in 2004 to $650/metric ton.
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The price of cobalt has more than tripled to $24/lb in about a year despite what traders call "a quiet physical market" in North American caused by weak production of superalloys, cemented carbides and chemical catalysts. The price-inflating global demand surge comes from Asia, where rechargeable battery makers can't get enough cobalt, says GFMS Metals Consulting. Most rechargeable batteries for electronics products are made of lithium, with cobalt compounds in one of the electrodes.
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