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Falling Metal Prices Could Be A Boon For Manufacturers

  • The dramatic drop in metals prices could be a boon for buyers. 
  • Aluminum and stainless steel spot prices have fallen by 30% or more, while carbon steel has plummeted by 49%.
  • Every manufacturing organization that relies upon semi-finished metals or parts and components containing metal should see these cost-downs for 2023.
Metal Prices

  Via AG Metal Miner 

Most metal prices experienced considerable drops from price levels seen just a year ago. Indeed, excluding lead, all non-ferrous and ferrous metal prices appear considerably below price levels seen in 2021. Most suppliers continue to stay quest amidst this decline, opting to place the onus of cost reductions on procurement. That said, detailed should-cost models for semi-finished materials can help drive double-digit cost savings for carbon steel, aluminum, and stainless steel.

2023 will be the first in several years where metal prices will favor buying organizations over suppliers. This dynamic provides a meaningful opportunity for buying organizations to recoup funds from 2020-mid 2022 price increases. However, to reap these benefits, buying organizations will need to understand precise price drops. This applies not only to the exchange-traded portion of metal buys (e.g. ingot prices) but also to the price drops for many of the costlier elements that make up the total cost. Such elements include price drops for conversion premiums, freight rates, MW premiums, surcharges, and any other add-ons applied to products in rising markets.  

Every manufacturing organization that relies upon semi-finished metals or parts and components containing metal should see these cost-downs for 2023. This is true regardless of both industry and demand.

In this post, we will explain the current metal market price trends. We’ll also explore what types of cost-savings you can expect for your semi-finished material spend. Lastly, we’ll discuss several tips for what to do next.

Metal Prices Continue to Decline Across The Board 

As you can see, metal prices are down substantially from just a year ago.

  • Aluminum Ingot: 30%
  • Aluminum MW Premiums: 18%
  • Stainless Steel Spot Price (304): 32%
  • Carbon Steel (CRC): 49%

Mapping Spend-to-Price Charts 

To capture the full price declines, buying organizations will want to look at the month in which they established last year’s contract. However, they must also determine whether or not they utilized an index and/or if they agreed upon a specific price. Next, companies should take a price chart/report such as the MetalMiner MMI chart or 12-month chart.

Related: Strong Sales Data Sparks Rally In European Auto Stocks

They can use this to map out price declines and determine a starting point for contract negotiations. For certain metals, buying organizations will also need to track price escalation for adders and extras. These include things like coatings, films, Midwest premiums, surcharges, etc. Tracing these changes should help separate base price fluctuations from other variations.

In terms of parts and components, simple should-cost models can help procurement assess the appropriate cost-down levels. These models include the percentage of content coming from metal from other elements and value-adds that make up total cost. Finally, in sideways to falling markets, using a contracting index such as CRU or a trailing 30-day average price could make the most sense.

A Slowing Economy Requires Renewed Focus on Cost Reduction Initiatives

By closely following the underlying metal price trends, buying organizations will find themselves in a strong negotiation position. This is especially true when compared to recent years. The combined benefits of communicating openly and honestly about projected purchasing volumes, building rapport with new suppliers, and identifying alternative suppliers to mitigate global supply chain risk will help customers see more favorable metal prices throughout 2023.

By Lisa Reisman

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  • George Doolittle on October 20 2022 said:
    In theory great news if you're manufacturing CH-47s in Philadelphia or C-130s wherever they are still made in USA. Should be great news for $ge General Electric in point of fact but in the end even gold still is subject to the vagaries of the *"economic state."* As boom turns to bust as we all can now plainly see (cough cough Great Britain cough cough) credit costs go from being very dear to suddenly and simply *"non existent"* (i would argue a prelude to a currency collapse and hyperinflation.) If true the GB would hardly be alone with first Turkey now Russia now the entire EU all experiencing i think what is known as *"a pricing wave"* where everyone rushes in to buy goods before The Price Increase and suddenly said cycle not only repeats but gets continuously worse.

    It must be noted that Great Britain whilst outraged that Weimar Germany defaulted upon all debts incurred from World War I through hyperinflation through the Dawes Plan from the USA the situation did stabilize and British Pound Sterling still more than ever in point of fact World's Global Reserve without near the totality of loss that the USA would wind up trudging through from boom to bust 1920s-1930s.

    Obviously this lead to a great deal of more than just Financial Reform in the USA...much tho not all rolled back in the 1990s...but yes absolutely as with the British Pound during the USA Great Depression so too the US Dollar today is simply not being impacted nearly as so much as the rest of World as the teeth of a *MASSIVE* bust begin to be sunk into the ahem *"Global Liquidity."*

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