Factors Affecting Product Cost
Staff -- Purchasing, 11/3/2005
- Natural-gas prices have risen above $13 per million British thermal units from around $7 a year ago. With gas companies still trying to recover from late-summer hurricanes, Mike Walden, an economics professor at North Carolina State University, expects fourth-quarter natural gas prices of $15 and possibly higher.
- Caustic soda has risen as high as $600/metric ton since supplies have tightened following the fire and subsequent shutdown of Formosa Chemical's Point Comfort, Texas, chloralkali plant. The new price is about $100 higher than the October average.
- "The longer-term history of the oil market is one of boom and bust," says Tim Evans, of IFR Markets. Evans feels crude is due to be halved to $30 a barrel by the second quarter of 2006. He points to government inventory data showing that retail gasoline prices near $3 a gallon are slowing demand—which will lead to reduced demand and lower prices for crude.
- Several structural steel mills are seeking $600/ton prices for wide-flange beams in November due to an uptick in demand, reduced market inventories and lower-than-expected imports. In October, beams were $545 for end-users, the same as in September, but crept up to $585 for buyers at service centers seeking to restock inventories.
- With supply staying tight, spot ethylene prices have moved well above contract levels. October spot ethylene deals reached 72¢; now, early November spot has been confirmed at 73¢/lb. Those prices are well above the 49-59¢ ethylene contract prices—which actually are academic since force majeure has been declared by most key suppliers.
- Dow has issued 45¢/lb price hikes for the U.S. and Canada sales of vinyl acetate monomer in November. "The lasting impact of two hurricanes in the Gulf Coast has created extremely high prices and limited availability of raw material and natural gas," says Alessandro Trombini, marketing manager, in explaining the price increase.
- Spot prices for common alloy aluminum sheet averaged $1.60/lb in October, and some analysts see further increases ahead. However, other analysts now see slippage in the fourth quarter. They're taking their lead from market leader Alcoa, who agrees that business conditions for flat-rolled aluminum could be weaker in the final stanza due to seasonal softening in the common alloy and can sheet markets.
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