Even in the face of increasing demand and diminishing supply, today's specialty-metal suppliers utilize numerous internal advantages and external resources to place small and large volumes of their product into the hands of manufacturers in a timely manner at predictable price points. As a result, manufacturers can maintain production schedules and stay within budget to retain competitiveness within their particular market.
A number of factors account for the present-day challenge that manufacturers face in obtaining raw metals--not the least of which could be referred to as the "China Syndrome."
"China is in the midst of a construction and durable goods building boom --all of which uses steel, which has accelerated since they were awarded the Olympic games," observes Tim Grady, chairman and CEO of consulting firm NetMark International Inc. Since 1986, NetMark has served more than 350 worldwide clients from its Atlanta headquarters.
At the same time, China plays a singular role in cornering supply, snapping up defunct steel mills from the Rust Belt, putting them on barges to China and then reassembling the plants with modern updates. To feed these mills, China sucks up huge quantities of scrap metal from all over the world. To a lesser degree, India's booming demand for goods also contributes to the migration of scrap and specialty metals to the Far East, further upping demand.
With the resultant shortage of scrap metal, steel in the United States has to be made from newly mined ore, which is more expensive then charging the furnace with scrap. This process also requires coke, made from coal, and coke prices increased 36.2 percent in 2005.
"These factors hit about the same time, so we saw some rapidly accelerating prices for steel, stainless, nickel, and titanium that have not abated much," says Grady.
By some accounts, metal-commodity prices rose by 180 percent in the 2002-2006 time frame. As an example, the spot price of nickel alloys in 2005 hovered at approximately $25,000 a ton, whereas current prices run about $40,000 a ton. Over the same period, titanium has jumped from $15 to $60 per pound at its peak.
For manufacturers, price creep is bad enough. But even more insidious is the damage wreaked upon a production schedule because of delays in obtaining materials. Some mills and downstream distributors have quoted delivery times of 80 weeks, an eternity in today's manufacturing environment.