Living in a materiaL worLd - Minnesota Precision Manufacturing ...

COVer | RAW MATERIALS
STEEL USE AROUND THE WORLD
Other Europe
3%
New EU
2%
EU
14%
CSI Former
(USSR)
13%
Source: PMPA
NAFTA
13%
Others
10%
OtherAsia
15%
Impact on Manufacturers
Not all manufacturers are being
affected by material bottlenecks and
price swings, however. While some are
scrambling to fill inventories, others have
barely noticed any changes at all.
Kurt Manufacturing Company
Inc., which purchases large amounts of
aluminum and steel, hasn’t experienced
any problems ordering raw materials —
only steady price increases. Over the last
6 months, the company has been ordering
quite a bit of metal to keep up with orders,
and Brad Carlstrom, Kurt’s purchasing
manager, believes it’s a buyer’s market.
“The supplies still seem to be strong,”
he said. “I guess it depends on what type
of metal you’re chasing, but for basic
aluminums, steels and stainless, I haven’t
had any problems. On the other hand, a
real uptick in demand will cause issues.
There’s no question that the service
centers around the Twin Cities have been
a cushion for us.”
Carlstrom said he hasn’t noticed a
difference in lead times, either. However,
he has noticed a steady increase in the
price of aluminum, which crept up to
over a dollar per pound earlier this year.
“But that’s going to turnaround,” he said.
“I’m anticipating that quarter by quarter,
we’ll see a drop in aluminum prices.”
It’s a different story at Cass Screw
Machine Products Company, which
purchases mostly carbon rounds to make
screw machined products.
China
31%
Japan
8%
In the fall of last
year, Kalei Ensead, who
works in the company’s
purchasing department,
began noticing that
some distribution
centers couldn’t fill
her orders, especially
if she needed larger
quantities. She said she
wasn’t ordering anything
special, just standard
grade carbon steel.
“We’re getting busier
and looking for materials
that just aren’t there,”
Ensead said.
Now, instead of buying
10,000 pounds of stock
from one vendor, she is
buying it from three.
In addition, Ensead is dealing with
higher prices. “When you run into a
situation where availability is slim, you
start going outside of your normal source
and you end up paying more,” she said.
“Sometimes it’s cheaper to pay more for
a product than to have a machine sit for
3 days.”
Impact on Distribution Centers
Demand seems to be picking up
at distribution centers, although it is
nowhere near the level of early 2008.
The question is whether the demand is
temporary or long-term. If it’s temporary,
many distribution centers will continue to
operate at less than full capacity.
EMJ Metals
Orders are way up at EMJ Metals
from this time last year. The company is
on pace to do over $100 million in sales
this year and beat last year’s revenue by
20 percent.
EMJ is owned by Reliance Steel &
Aluminum Company, which is one of
the largest metals service centers in the
United States. Mike Goepfrich, general
sales manager, said he doesn’t think most
manufacturers are having problems with
availability, especially if they’re ordering
standard grade, but it depends on where
they order it.
He said he’s seeing more people
who are normally mill buyers turn to
distribution centers for their metals
because they can’t wait 6 to 12 weeks.
“I’ve never had a customer call me and
tell me they’re going to fire me because of
a price,” he said. “But I have had people tell
me they’re going to fire me because I didn’t
have the stock they needed.”
In the meantime, Goepfrich expects
metal prices to increase in the short-term,
at least until the third quarter when they
may begin to flatten out.
Spectro Alloys Corporation
When the Cash for Clunkers program
went into effect, the automakers were
caught off-guard and so were many of
their material suppliers. Spectro Alloys
Corporation, which converts secondary
aluminum scrap into a new alloy, was
one of them. The company had been
producing at 50 percent capacity when it
was suddenly slammed with orders.
“We were going to our suppliers and
they weren’t able to supply fast enough,”
said Alan Gergen, regional sales manager.
He believes the supply chain is still
tight, resulting in longer lead times and
less flexibility in pricing. He attributes
much of the shortage to China and India.
“If the United States used its own
scrap, there would be enough,” Gergen
said. “But it’s all being exported. The
U. S. government doesn’t really see that
as a problem because they see this huge
trade deficit and they get excited when we
send things overseas.”
Cost has been another challenge
for Spectro Alloys. At one point a year
ago, the basic aluminum alloy that the
company produces cost .65 cents per
pound. Today it’s $1.03 per pound.
Gergen expects to see a market, for
raw materials, that is flat to up over the
next year. His advice to manufacturers
is to budget for the cost of the products
they’re making—and stick to it.
“Buy according to that budget instead
of trying to beat the market,” he said.
Chicago Tube & Iron
Chicago Tube & Iron is one of the
largest steel service centers in the United
States, with 10 subsidiaries throughout the
Midwest. It was hit hard by the recession.
During the first 3 quarters of 2008, the
price of scrap was as high as $800 per ton
and the company was on track to have a
record year. During the fourth quarter,
however, orders came to an abrupt halt.
The price of scrap dropped in half and so
8 | PRECISION MANUFACTURING May | June 201