Raw Material Pricing – Party like it’s 1999

Remember that old Prince hit?
I was dreamin’ when I wrote this
Forgive me if it goes astray
But when I woke up this mornin’
Coulda sworn it was judgment day

As I was doing the research for this article, that tune kept going through my head. The events of the last 6 months do feel more like a dream than reality. Judgment day? We’ll talk more about that later in the update series.

Raw materials are a large component of costs for metal stampers. So what has happened to the prices of the most commonly used raw materials?

Metal stampers care most about these input costs:
something to make the steel not rust (usually zinc or nickel)

For Copper, Aluminum, Zinc & Nickel, prices are back down to 2004 levels. In a few cases, even below 2004 levels. See these charts, courtesy of Kitcometals.com

Steel prices are down below 2007 levels.

So it’s not 1999, but in a lot of ways, it’s 2004 all over again.

What does this mean for stampers? Well, a major input cost has reverted to 5 years ago levels. Is that enough to ensure a return to profitability? Not usually. Stay tuned for the next part of the puzzle.

China quake seen cutting metals output, lifting zinc prices

Now here’s an aspect of the China quake scenario I’ll bet you hadn’t considered …

Heightened concerns that China’s devastating earthquake will curtail the country’s massive metals output helped aluminum, zinc and other base metals extend a two-day rally Friday.

China is the world’s largest producer of zinc, aluminum and lead.

Only a sliver of the country’s base metals mining and production takes place in Sichuan province, the epicenter of Monday’s 7.9-magnitude earthquake, which Chinese authorities now estimate has claimed more than 21,500 lives. But the two nearby provinces also jolted by the quake — Shaanxi and Gansu — have mines and smelters as well.

Bloomberg wrote:

Zinc rose in London, heading for the biggest weekly gain since February, as the biggest earthquake in nearly six decades in China hit output in the world’s biggest producer. Aluminum also climbed.

China’s 7.9-magnitude earthquake is affecting as much as 350,000 tons of zinc smelting capacity in Sichuan and neighboring provinces, according to Beijing Antaike Information Development Co. The tremor that took place May 12 also affected transportation and power supplies.

At the same time, other analysts are saying that China will temporarily stop buying some metals, because they are distracted by bigger domestic issues at the moment.

However, logic would indicate that, if there is rebuilding to be done afterwards, they will need more, not fewer, resources.

China’s Pain is Century Aluminum’s Gain

The main part of the article is about aluminum, how a major aluminum smelter in China had to shut down, and what that’s going to do to the aluminum market.

But the larger issue, for most stampers, is in this section. Power problems and unreliability in China are going to increase

Arif said that while the outages at Chalco’s plants are only temporary, there will start to be more power issues in China going forward. China has been subsidizing power for its users so demand for power has grown unabated, Arif said. As the costs to produce power, whether coal or other fuel, has increased, the Chinese government has spoken about increasing the power costs for institutional consumers like aluminum consumers. “That’s why you’ll start seeing a lot more of these types of power issues develop,” he said.

Mercedes SLC Supercar To Feature Aluminum Construction

Aluminum cars, to reduce weight. Considering how much steel has gone up these days, there might be price as well as weight advantages in the future.

“There are several factors that go into making a fast car and having a powerful engine is just one piece of the puzzle. Mercedes will reportedly tackle another piece — curb weight — on their upcoming SLC supercar by building the model out of aluminum. “

Aluminum-Bodied, Lighter-Weight Range Rover Coming in 2012

I thought aluminum cars had been looked at and rejected some time ago. Interesting to see they’re looking at it again.


The next all-new Range Rover is coming in 2012, and reportedly it will benefit from an aluminum body shell to cut as much as 40 percent of its weight.

The U.K. publication Autocar reports that the weight savings from the change to aluminum could save 660-880 pounds from the curb weight of the big luxury SUV.

Kobe Steel develops world’s strongest aluminum alloy

It’s not clear that this is of any immediate relevance to metal stampers. It looks like production is still some years off. But it’s interesting to know about anyway. And odd that it would be developed by a steel company.

Japan Today
Kobe Steel Ltd said Thursday it has developed a new aluminum alloy, which it claims is the world’s strongest, for use in vehicles and fuel tanks for space shuttles.

tensile strength 10% higher than the aluminum-lithium alloy developed by Lockheed Martin