FROM THE FIELD
September 2007
When Good Materials' Prices Go Bad

Just about everyone with a pulse in the equipment and supplies business knows materials pricing has been nightmarish for a couple years now. Like lots of publications covering many industries, we've written about it. Our e-newsletter, FER Fortnightly, has covered the topic regularly. Generally the focus has been on stainless, but resins and copper also have come in for their share of discussion.

And then, in late July, word came from Tom Stundza, executive editor at Purchasing magazine, that the bubble on nickel pricing was bursting. He told Robin, who covers the economic beat for Fortnightly, that nickel had dropped 20% to 30% on the London Metals Exchange during June and July. Stundza figured stainless pricing might begin softening in September.

"Good news" is how the headline touted it when Robin wrote it up. And it was good news, especially compared to the sort of poke in the eye that nickel and stainless buyers have had for a long time now. But before you break out the good stemware, a bit of perspective: Purchasing figures nickel will drop to $16.30/lb. in the fourth quarter of 2008, down from a projected fourth quarter '07 price of $17.46. Now compare both of those to the first quarter of '06, when nickel was at $6.91! So nickel is expected to drift downward to more than twice what it was in early '06.

Stainless sheet will follow suit, Stundza figures, based on current info. So it'll soften to $4,315-ish by the end of '08, compared to roughly $5,500 at the end of this year. That's an improvement for sure, but not compared to the $2,261 it was in early '06.

"Prices will come down, but not the way you'd hope."

What to do? You can't control what you can't control, which makes it doubly important to control the things you can. Go to your suppliers and ask them about alternate materials. In foodservice, we're in the habit of thinking in terms of 304 stainless, just as drivers on the Edens Expressway here are in the habit of driving SUVs upward of 80 mph and then griping about gasoline. But we do have alternatives, in both cases.

Consider different grades of stainless, grades that either minimize nickel or ditch it completely in favor of some other anti-corrosive. Consider non-metals, too. The latest generations of high-temperature plastics and so on are enormously versatile. And while they're not cheap, their pricing looks better and better every time metals go up.

The main thing is to be aggressive about looking for options. You don't have to take it lying down. And when you stand up, you also take demand pressure off, and you know what happens when demand softens.

Brian Ward
Chief Editor