Sluggish Recovery Affecting Commodities Prices And Buying Patterns

“Everyone at every level of the materials supply chain is trying to raise prices,” says Tom Stundza, senior analyst in the Pricing and Purchasing Group at IHS/Global Insight. “The problem is there’s a lot of buyer resistance.” He doesn’t expect much change in this situation the next few months. “We won’t see a change until the manufacturing expansion gains traction,” he says.

Not that prices for most metals, plastics and other key commodities used in foodservice equipment and supplies aren’t significantly higher than they were a year ago. Most steels, including stainless grades, are up an average of 25% from their cyclical lows last year. Aluminum prices are up a bit more. And copper prices, boosted in part by currency issues and speculation, are running more than 35% higher, according to Stundza.

But the trend since the summer has been for softening of prices, as the U.S. economy has slowed again. Since its high in the spring, the average street price of cold-rolled sheet steel has dropped 16% to $666, according to IHS/Global Insight data, and is on track to average $635 this quarter. Hot-dipped galvanized prices are off 13% during the same period. The MEPS Stainless Index for North America shows stainless prices have fallen about 16% since their highs in June.

IHS/Global Insight spot market data for 304 stainless sheet have prices moving in a narrower range. The average cost per ton rose in October to $3,146, up 11.2% from August. Prices are running 22% higher than in January.

“Manufacturing is expanding,” Stundza says, “but so is capacity.” He points out a new ThyssenKrupp steel plant in Alabama has begun shipping cold-rolled products. And capacity utilization at steel plants in the U.S. is only 70.5%.

In this climate, many materials buyers are sitting on their hands, Stundza says. “Buyers are contracting just for what they need,” he says. “Almost no one places big orders when prices are falling.”