Factors Affecting Product Cost
Staff -- Purchasing, 1/13/2005
- LCD (liquid crystal display) computer screen prices have plunged more than 30% in the past six months and even-lower prices are imminent. Because oversupply still exists, LCD screen prices will continue to slide before a demand spurt eliminates the excess, say Deutsche Bank and Barits International Securities. Note: South Korea's LG Philips, and Taiwan's Chi Mei Optoelectronics, reckon that panel prices could fall another 20% in early 2005.
- Pulp mills have told U.S. customers they are raising northern bleached softwood kraft pulp (NBSK) prices by $30 a metric ton. Weyerhaeuser, the largest market pulp producer, along with Bowater, Canfor, Domtar, International Paper and Tembec all want NBSK to sell at $650 by reducing the discount off list price. However, paper mills may be reluctant to accept the price hike without squabbling.
- Inflation pressures have intensified farther up the production pipeline. The Labor Department's overall Producer Price Index gained 1.7% in October, the largest increase since 1990. Importantly for manufacturing, prices of crude goods rose 4.3%, reversing a 4.2% decline in September. Prices of intermediate—or semi-processed—goods rose 0.9% after a 0.1% increase in September.
- The average price of application specific integrated circuits (ASICs) will stay flat or decrease slightly over the next several years. Even better news for buyers is that the number of transistors and gates per chip will rise and the cost per gate will decline. Example: The price of a standard cell ASIC will decrease marginally from $8.48 in 2003 to $8.06 in 2008. However, the number of gates will increase from 424,000 to more than 1.2 million during the same time. The average per-gate price will fall from 1.4¢ to 0.33¢.
- FedEx has announced it will raise rates at its ground division by an average of 2.9% and at its FedEx Express air unit by 2.6% in 2005 as it works to offset higher fuel costs. Citing the dramatic run-up in oil prices in recent months, freight-published rates at FedEx Express will rise 6% in January. The coming price increase is steeper than rival United Parcel Service's 2.9% climb in rates for overnight air deliveries, also in January.
- With business travel beginning to pick up, the average hotel room rate is on the rise. Outlook: In the 50 largest U.S. markets, room rates will rise by 4.7% in 2005, to $102 per night, forecast hospitality consulting firms Torto Wheaton Research and PKF Consulting.
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