Factors Affecting Product Cost
Staff -- Purchasing, 4/15/2004
- Memory chip prices are rising. The average spot market price for a 32-megabit x 8 double data rate DRAM (dynamic random access memory) chip increased from about $4 in mid-February to $4.43 in mid-March, as demand has been strong and supply tight. One reason for tight supply, according to iSuppli, is that DRAM makers are transitioning to more advanced processes and yields aren't as high as they should be.
- Expect to see higher prices soon for aluminum electrolytic capacitors, partly because of strong demand, but mostly because of rising aluminum prices, says analyst Jason Ma of iSuppli. "Courtesy of the strong demand from makers of such consumer electronic products as DVD players, audio amplifiers and home theater systems, electrolytic capacitor sales are hitting highs not seen since the IT spending boom that ended in 2000," he says. "However, suppliers may be forced to raise prices in the second quarter if the prices for the aluminum used to make their products continue to rise."
- Dell plans to deliver less-expensive storage array network (SAN) systems to attract small and midsize businesses that don't want the expense of existing fiber channel gear. Russ Holt, vice president of enterprise engineering, says Dell has lowered the cost per gigabyte of SAN storage by 70% since it started selling products in late 2001. The firm now wants to drive cost out of the SAN infrastructure, he says, but admits the program for a subentry platform has yet to be commercialized.
- Low selling prices remain rampant in the paperboard and paper-based packaging markets, says producer Smurfit-Stone Container. Still, mills are trying to make the first open-market increases on benchmark paperboard grades since autumn of 2002. Producers, however, do not appear strongly confident that their $20/ton increases will hold.Various buyers say they have been guaranteed full rebates if the increase isn't implemented on a widespread basis in the open market.
- Rising gasoline prices, which set a record in March, are pushing crude oil futures higher. Crude futures for April deliveries averaged $38/barrel on the New York Mercantile Exchange in March. Now, the energy markets are "ripe to surge through $40," says Kevin Kerr, editor of newsletter Kwest Market Edge. He says likely production cuts by OPEC, terrorism concerns, and civil unrest in Venezuela "will continue to rattle oil investors' nerves" and push prices higher.
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