[TheForge] Fw: standard materials on hand

Sat Jun 13 12:49:54 EDT 2009

Bob is right on.  As an example, bulk copper that had hit a high of $ 6000 
per metric ton got down to $ 3000 early this year and is now back up to $ 
5000.  Lots of reasons including the closing of mines because of low prices 
etc.  It is all the game of supply and demand.

Dave

--------------------------------------------------
From: "Schade" <schade at acegroup.cc>
Sent: Saturday, June 13, 2009 12:06 PM
To: "terry l. ridder" <terrylr at blauedonau.com>; "Blacksmithing List 
Sponsored by ABANA" <theforge at mailman.qth.net>
Subject: Re: [TheForge] standard materials on hand

>
> On Jun 13, 2009, at 3:05 AM, terry l. ridder wrote:
>
>> hello;
>>
>> given the low prices on metal in general i was wondering
>
> ______________
>
>
> This article is about stainless steel makers but it seems that the
> same dynamic would/could apply to plain steel. If so, todays lower
> prices could go away soon.
>
> Bob
>
> ______________
>
>
> JUNE 10, 2009
>
> Fixed Costs Chafe at Steel MillsCapital-Intensive Producers Are
> Raising Prices Despite Weak Demand
> By ROBERT GUY MATTHEWS
> BRIDGEVILLE, Pa. -- Many stainless steel makers, facing high operating
> costs, are increasing prices despite weak demand.
>
> "We are raising prices because of the increased costs of operating our
> mills at the current lower levels. We are not seeing an increase in
> demand," said Dennis Oates, chief executive officer of Universal
> Stainless & Alloy Products Inc. He has boosted prices 5% to 6% twice
> since the beginning of May.
>
> Universal isn't alone. Other producers in the capital-intense steel
> business are beginning to do the same. In April, Allegheny
> Technologies Inc., AK Steel Corp. and North American Stainless Inc.
> each said they would increase prices for some types of stainless steel
> about 5% to 6%. Last month, RathGibson Inc., a small specialty
> steelmaker based in Lincolnshire, Ill., told customers it was
> increasing prices 6% on average.
>
> "Unlike mill increases announced in recent years, this is obviously
> not driven by increasing global demand, but rather by fixed costs
> being proportioned across significantly lower demand," the company
> said in a letter to customers.
>
> To understand why steelmakers would raise prices when demand is
> terrible, it helps to understand modern factories -- and the operating
> demands of their equipment.
>
> At Universal's plant here a huge disk-shaped blower called a pre-
> heater shoots 2,300 degrees Fahrenheit hot air at a giant ladle that
> holds melting steel. The pre-heater must be kept running even if the
> plant isn't making steel. It is kept hot to prevent the refractory
> bricks inside from disintegrating.
>
> The same is true with the mill's baghouse, essentially a huge vacuum
> for pollutants. Its industrial-sized fans run continuously because
> turning the motors on and off can damage them. Whether the mill makes
> two batches or six of steel, the costs are the same.
>
> "We're getting pinched," said Mr. Oates.
>
> John E. Lichtenstein, managing director of Accenture's Metal Industry
> Group, said raising prices in this economy is a smart business move
> for some steel makers. In past recessions, steel mills would actually
> increase mill production, believing that selling steel cheaply at
> least brought in cash.
>
> The problem, though, is that sales prices eventually fell so low that
> the mills went into bankruptcy.
>
> "The whole mindset has been changed in the industry," he said.
> "Sometimes you have to accept the fact that raising prices is a risk.
> But you are better off not chasing that last sale to the bottom."
>
> The increases aren't industry wide, however, and steel prices in
> general continue a downward trend, with producers reducing or keeping
> prices unchanged.
>
> Mining companies, aluminum makers and other manufacturers with high
> material and production costs are grappling with the same issue, said
> Jason Goulden, vice president of research for Metals Economics Group,
> an information and consulting company. The stubbornly high costs of
> running mines and smelters has forced many miners to shut operations,
> he said.
>
> In the past, many producers would stay in business and continue to
> sell their commodities at lower and lower prices, hoping the market
> would turn upward in time to save their businesses.
>
> But the low prices and higher operating rates actually delayed
> recovery. "It is much better to have this type of reaction. Because
> when demand does return you will see a steeper increase in prices," he
> said.
>
> The world's steel plants are operating currently at less than 45% of
> capacity -- some of the lowest operating rates ever -- which has
> escalated production costs and led to huge losses.
>
> Universal Stainless said it lost $3.8 million in the first quarter of
> 2008, citing among other things, the costs of running its plants at
> such low operating rates.
>
> The losses come in spite of significant strides in the company's costs
> and productivity. Streamlined trucking routes and computer tracking
> systems have reduced delivery times by 10%. Universal now makes
> 100,000 pound batches of the most common steel product, instead of
> filling individual orders.
>
> Kevin Smith, a supervisor in the melt shop said he would rather have a
> bit more inventory of basic product that he knows he can sell, than
> have the cost of starting and stopping production for custom orders.
>
> Such changes, along with reduced overtime and shifts, should help cut
> costs by 25% from last year, a significant reduction but not enough to
> offset the 40% to 50% drop in sales.
>
> Universal's Mr. Oates said nearly all of his customers have accepted
> the price hike, although he acknowledges some are in financial trouble
> themselves and can't afford it.
>
> Steel service centers, middlemen who buy from the mills and sell to
> manufacturers, appear to be paying the higher prices, in part because
> they think they can pass them on and because they have fewer
> opportunities to find cheaper alternatives.
>
> "We should be successful at passing through the price increase," said
> Brian Deck, vice president of finance and treasurer at Ryerson Inc., a
> large Chicago-based steel service center.
>
> Mr. Lichtenstein of Accenture, said service centers have less
> opportunity to buy lower priced foreign steel. "The tightness of
> credit is straining the ability for service centers to buy material
> off shore."
>
> Steel buyers also are reluctant to place an offshore order that
> wouldn't show up in the U.S. for months.
>
> "You have no idea what the market is going to be 50 to 90 days from
> now. The last thing you want to do is pay for steel today and have the
> margin drop 20% to 30% once you get it," Mr. Lichtenstein said. Tom
> McCarty, owner of Westbrook, Conn.-based stainless steel service
> center McCarty & Sons Inc., said that he is paying more for stainless
> steel and is absorbing the costs because his customers aren't going to
> pay more. His profit margin is reduced, but he is still profitable, he
> said. "You see what the big guys are losing on the books."
>
> Write to Robert Guy Matthews at robertguy.matthews at wsj.com
>
>
> ______________________________________________________________
> TheForge mailing list
> Home: http://mailman.qth.net/mailman/listinfo/theforge
> Help: http://mailman.qth.net/mmfaq.htm
> Post: mailto:TheForge at mailman.qth.net
>
> TheForge mail list group photo site is
> http://www.photoaccess.com
> Login: blacksmithblacksmith at hotmail.com
> Password: anvil
>
> This list hosted by: http://www.qsl.net
> Please help support this email list: http://www.qsl.net/donate.html
> 