Factors Affecting Product Cost
Staff -- Purchasing, 11/18/2004
- Keep a close eye on prices of certain dynamic random access memories, especially 32x8 DDR33/400 DRAMs. Spot market prices are increasing, from a range of $4.65 to $4.80 apiece in early October to about $4.75-$4.95 at the end of the month, says independent distributor Fusion. Demand has been strong from personal computer makers making consumer PCs for the Christmas holiday selling season. So, look for the price to reach $5 before dropping back.
- Expect price erosion for standard linear integrated circuits for the rest of the year. That's the word from market insiders who believe IC prices will fall 2-3% in the fourth quarter because of weakening demand and rising inventories. Also, market analysts at iSuppli forecast that buyers will see prices for analog application specific standard products falling by about 1%.
- Structural panel and framing lumber prices stumbled last month by about 10% with supply exceeding demand by a healthy margin. Transaction prices for wood products are slipping because of slow purchases and ample production, analysts explain, with deflation most pronounced for oriented strand board (OSB), southern pine and various grades of Southern and Western plywood
- Buyers need not fear shortages of high-priced office papers and packaging grades: Demand has slipped in the second half and transaction prices have softened. Lower overall shipments principally are due to inconsistent demand and competitive market conditions for paper mill packaging products.
- Makers of OLED (organic light-emitting diode) devices are responded with price cuts recently to offset a slowdown in orders from cellular telephone manufacturers. OLED technology produces self-luminous displays that do not require backlighting. However, mobile telephone handset makers have been switching to cheaper STN-LCD subdisplays to lower their overall cost of materials.
- Diesel prices rose at the end of September to a national average retail price of $2.21/gallon, a record high and 72¢ higher than last year. Prices around the country rose on fears of a cold winter and a shortage of distillate fuel, which goes to heat homes as well as power big rigs. Economists specifically worry about diesel prices—which may go significantly higher—because more than two-thirds (68.9%) of the country's freight travels by diesel-fueled trucks. According to American Trucking Associations data, trucks hauled 9 billion tons of freight in 2003; so far this year, truck tonnage is up 7%.
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