Steel price fluctuations – protecting against uncertainty
29 June 2018
29 June 2018
The price of steel is readily affected by various global events and, as a result, can change dramatically. If you rely on steel as the main component material of your product, how can you best cope with these varying costs?
At Universal Wolf we are all too aware that a dramatic change in steel prices can make the difference between a profitable product and a non-viable one. How can you best avoid suffering from the whims of this volatile market?
Why do steel prices change?
Global changes continually impact on the steel market and several developments have been influencing the price of this commodity over recent years – mainly pushing it up.
The world-wide recovery of manufacturing and construction industries has increased the demand for steel. At the same time the cost of raw materials like iron ore has increased, along with the other costs of producing steel; energy, oil and transport expenditure. These changes have applied pressure to profit margins of steel manufacturers, which must be maintained by passing on costs to their buyers.
The ready supply of steel, occasionally even criticised as over-supply in the past, is stabilising. China, long one of the world’s biggest steel producers and exporters, has scaled back its activity. In addition to focusing more on services rather than manufacturing and infrastructure, the government has introduced strict policies to address environmental issues like air pollution. Some of the most inefficient and dirty steel manufacturing sites have been forcibly closed and the amount of steel China produces has slowed accordingly.
Overall greater demand for a resource which has become more expensive to produce and less available than it used to be, had looked sure to keep prices high for the foreseeable future. But as with any single commodity, it is hard to predict such a path with absolute certainty.
At the time of writing steel prices were affected by US President Donald Trump’s announcement in March 2018. His plans to impose import tariffs of 25% on steel and 10% on aluminium have thrown steel prices into disarray, with different countries experiencing different effects depending on how they are likely to be impacted.
This is just another example of how steel prices can change very suddenly, something that anyone who relies on this material for their product must be aware of.
What can you do?
If your product is made from steel, you need to get maximum value from your material. You must ensure that you have a production partner who understands the unique pressures involved in working with steel and can make sure you are getting the very best possible service to prevent unexpected additional costs being incurred through wastage and/or error.
At Universal Wolf we are always striving to achieve the best possible outcome for our customers. We want us both to be proud of what we accomplish together and we want to ensure you succeed. We have decades of experience in the metal fabrication industry, so we know what works and what doesn’t, and our highly skilled team mean you’ll get exactly what you’re asking for, created to an agreed specification and delivered on schedule.
We regard communication as an essential element of successful product manufacture at the best possible price. Establishing an open and honest dialogue with your manufacturing partner means you can advise them early on in the process whether you are planning a run of 10 of this particular model or 100. That way, when we are reviewing the total cost of manufacture, we can drive the best economies of scale possible, helping protect your margins.
The other key to managing potential dramatic shifts in the cost of your materials lies in very carefully reviewing and revising the initial design to ensure that everything is a) as it should be to prevent errors and a need for multiple revisions or alterations and b) not unnecessary or over-sized for the purpose, resulting in wasteful excess.
At Universal Wolf our NPI process is set up to iron out any weak areas and any areas where we feel the product could be improved, and we’ll always highlight areas where we feel that you are using steel unnecessarily or where your base design could be more streamlined. We won’t let you push ahead with a design that uses more steel than you need and/or which has faults that could only become apparent once a run of production is finished. That’s not the way we want to work.
As a result we can ensure that you are getting maximum value from the steel used to create your product. That way, if steel prices were to drop, it can only mean more profit for you. But most importantly, if steel prices increase, you are not going to find that your profit margins are squeezed out and your product is no longer commercially viable because of features that were ineffective or never essential to the very first design.
Want to work with us?
If this approach sounds appealing and you’re looking for a production partner of your own, why not drop us a line today? We’re looking forward to hearing from you.