- 28 April 2006 -
Metal, Energy Prices Weigh Heavily on Minds
By Greg Valero, g.valero@elsevier.com

Still reeling from skyrocketing energy prices, the U.S. metal finishing industry is now being stung by rising metal prices. The limited supply and increased demand for various metals has resulted in higher costs, which are beginning to be passed through the supply chain.

Metal prices reached record highs this year, with double-digit increases common for most metals, depending on the material and quality. To put the situation in perspective, consider that it costs the U.S. federal government 1.4 cents to produce a single penny, the result of runaway copper prices.

Gold prices surged to the highest point since 1980, as the metal benefited from its safe-haven status amid geo-political tensions. The price of an ounce of gold reached $645.85 on the London Bullion Market, the highest level since November 1980 and a 24% rise since the start of 2006. Silver prices recently struck $14.74, the highest level since January 1981.

There were record peaks, meanwhile, for platinum and base metals copper and zinc. Platinum prices hit a new record high, driven by speculators, and strong demand from car manufacturers which use the metal in catalytic converters. Palladium rose also, to $350 per ounce, compared to $343 the previous week.
Base metal prices showed similar gains, owing low stock levels, supply difficulties, and soaring investor interest. Prices of copper, used widely in construction and manufacturing, and zinc, often used in steelmaking, stuck fresh record highs and managed to hold on to the gains. Three-month copper prices reached a record high of $6,625.15 per tonne. Three-month zinc prices hit also a record high of $3,270 dollars per tonne.

How are energy and metal price hikes impacting surface finishing? Industry members say they're rolling with the punches, doing everything they can to nullify the impact on customer pricing—including cost-reduction initiatives. Companies are seeking alternative sources of supply and, in some cases, less expensive substitute materials. They are also looking at purchasing metals from low-cost countries in areas such as the Asia Pacific. Surface finishers who produce smaller parts, such as for medical devices, are less affected because they purchase less metal.

Price increases have become a way of life in U.S. manufacturing, and metal finishing is no different. Successful companies must continue to find ways to stay the course during a time when customers are looking for price decreases. The good news is economic indicators are pointing in the right direction and the industry appeared to have a strong first quarter. Nearly every supplier and surface finisher that I met at the recent Surface Finishing Industry Council convention reported strong first quarter sales, an indication that business conditions are improving and innovative companies are finding ways to stay the course in the wake of runaway energy and metal price increases.