Factors Affecting Product Cost
Staff -- Purchasing, 8/11/2005
- Sales of cellular telephones continue to rise worldwide, but not prices. LG Electronics says second-quarter cellphone sales increased 22% but average selling prices dropped 5%. Prices fell 4.5% on phones from Nokia. Average sales prices also slipped for Ericsson, says FIM Securities in Finland.
- The demand and supply balance for cement in the U.S. is creating a serious pricing problem. Cemex began boosting prices in the second quarter of 2004 and has boosted cement prices a total of 28%, to about $96/ton now from $75 then, calculates analyst Marcelo Telles at Credit Suisse First Boston. Further hikes are probable. Hector Medina, chief of planning and finance at Cemax, said in a recent conference call with analysts: "In light of continued strength in demand and tightness in supply, we expect the pricing environment to continue to be favorable," he said.
- Thin-film-transistor liquid-crystal display panel prices have weakened 42% so far this year because of a global supply glut. But an executive for LG.Philips LCD, one of the world's largest producers, tells market analysts to expect stronger demand and higher prices in the second half.
- Buyers should see stabilized prices next quarter for dynamic random access memory (DRAM) chips. Prices fell about 30% in the first half, and are soft this quarter as well, but most analysts now expect suppliers to cut back production. Another option is that producers may shift from DRAM to NAND memory ICs to improve margins.
- The Baltic Exchange's Panamax dry freight price index has slipped to a two-year low on waning global grains and minerals trade demand. The indicator is down due to a seasonal downturn in Latin American grains exports, a drop in Indian iron-ore exports to China, falling port congestion and rising global fleet supply, explains John Kearsey, executive director of Simpson Spence & Young consultancy in London.
- Copper cathode prices have been rising to fresh highs lately, but probably will fall 35% to about $1/lb over the next 18 months as miners strive to produce more of the red metal to meet anticipated Chinese demand. So says Juan Villarzu, executive president of Codelco, the world's No. 1 copper miner. "It took some time for the world copper market to realize that 10% annual growth in demand from China was sustainable, but now supply is adjusting and there will be more production," Villarzu says.
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