Factors Affecting Product Cost
Staff -- Purchasing, 5/6/2004
- Booming demand for copper from growing regions like Asia will stabilize the price of the metal at its currently high level, forecasts Werner Marnette, chief executive officer of German producer Norddeutsche Affinerie. World copper traded at an average $1.24/lb through March, but rose to $1.35 in April. The high price of copper also will be supported, Marnette says, by a "significant rise" in demand in the traditional markets of Europe and North America.
- With Chinese demand so strong that world supply of magnesium alloys has gone form glut to shortage, Norsk Hydro, the leading producer, has raised its global selling price. Note: The new price of $2750/metric ton ($1.52/lb) is 50% higher than the $1800/metric tons through much of 2003.
- Gallium prices are at historic lows in an oversupplied market, so GEO Gallium of Cleveland has sliced production worldwide to one-third of capacity. "Following a spike in prices in 2000-2001, additional capacity was built which the market never needed," says Terry Guckes, vice president for electronic chemicals. "The downturn in demand coupled with this added capacity has reduced prices to unprecedented levels."
- Motor vehicle pricing will continue to decay this year, even if sales improve, forecasts Banc of America Securities automotive analyst Ron Tadross. He expects pricing to decline by 1% to 1.5% from last year's average. Note: His 2004 annual sales target is 17 million vehicles.
- With world cathode supply tight and pricing volatile, brass mills are boosting sales tags for fabricated materials. That's possible because, after almost three years of decline, demand for copper and brass mill products began rising in the closing months of 2003 and is 10% higher so far this year. Meanwhile, global demand for copper shows no signs of slowing down and reserves are running very low. ``We're having to pay more for cathode and scrap, and we're trying to pass these costs on,'' says Michael Mann of Colonial Metals. Revere Copper Products no longer is providing customers with firm prices beyond one month after the order.
- Energy Department forecasters expect gasoline prices to peak in June at about $1.80/gallon for regular unleaded and then gradually decline through the summer — with possible price spikes along the way. The April outlook predicts that gasoline prices will average $1.76/gal for the full year — 20¢ higher than last year.
| Commodity Category | Period | Up | Down | Same | Diffusion Index |
| Fabricated metals | Apr | 83% | 1% | 16% | 90.8 |
| Steel | Apr | 82% | 5% | 13% | 88.2 |
| Copper & brass | Apr | 80% | 4% | 16% | 87.6 |
| Aluminum | Apr | 78% | 4% | 18% | 87.0 |
| Energy | Apr | 72% | 6% | 22% | 83.1 |
| Transportation services | Apr | 68% | 3% | 29% | 82.9 |
| Molded plastics | Apr | 62% | 4% | 34% | 79.2 |
| Plastic resins | Apr | 62% | 6% | 32% | 78.0 |
| Paper | Apr | 51% | 3% | 46% | 73.6 |
| Corrugated | Apr | 49% | 5% | 46% | 72.2 |
| Tooling | Apr | 48% | 6% | 46% | 70.9 |
| Organic chemicals | Apr | 44% | 6% | 50% | 68.8 |
| Industrial machinery | Apr | 41% | 5% | 54% | 67.6 |
| Inorganic chemicals | Apr | 38% | 4% | 58% | 66.7 |
| Semiconductors | Apr | 34% | 6% | 60% | 64.3 |
| Passive electronics | Apr | 32% | 4% | 64% | 63.6 |
| Computers | Apr | 23% | 18% | 59% | 52.3 |
| Source: Purchasingdata.com | |||||
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