Steel costs continue to escalate at a rapid and substantial pace. Some types of steel have increased by more than 50 percent since Jan. 1, 2008. For garage door manufacturers, it’s never easy to pass on or absorb an increase but it’s more difficult in a troublesome economy.
Unfortunately, escalating material costs stem from global issues of cost, supply, and demand. These enormous cost increases are passed on to U.S. companies in the form of surcharges or price increases.
Door Component Increases
Here’s a glance at some typical garage door-related cost increases experienced since Jan. 1, 2008.
· Pre-painted Steel Coils +45-55%
· Struts +30-40%
· Track Sets +25-35%
· Hardware Cartons +20-30%
· Torsion Tube +25-35%
· Springs Coned & Painted +25-30%
· Other Steel Components +20-25%
A Global Issue
During the last six months, the global steel market has experienced large cost increases for iron ore, coke, energy, transportation, and scrap. These input costs are expected to continue to rise.
The cost impact is compounded due to the demand of steel consumed by Asia and other emerging countries. The BRIC (Brazil, Russia, India and China) countries will consume much more of the world’s steel supply than they have in past years.
Growth in each of these countries is estimated to be about 10 percent while the U.S. growth projection is estimated to be less than 1 percent. Our country produces and consumes less than 9 percent of the world’s steel.
Raw Material Increases
Here’s an idea of recent cost increases faced by steel mills as of April 2008.
· Scrap +92%
· Iron Ore +150%
· Coking Coal +160%
· Energy Costs +25%
The weak U.S. currency has led to fewer imports being available. Foreign mills are selling their steel to other countries where they can get a more favorable currency exchange rate. At the same time, domestic mills are exporting steel to other countries that need more steel and are taking advantage of the weak U.S. dollar.
Aftershocks of the China Earthquake
Manufacturers are cautious. Anything can happen to put pressure back on an already tight supply market. The May 12, 2008 earthquake in China is a good example.
The earthquake disrupted steel production and logistics in several areas and brought two major steel making operations to a halt. As reconstruction begins, steel market prices could go up again because of the surge in demand.
The Bottom Line
The bottom line is that garage door manufacturers, their suppliers, and their dealers don’t have much choice but to absorb these increases. It is important for builders, architects, and homeowners must understand the dynamics of the situation as they will ultimately bear the impact of these cost increases.
Based upon raw material costs, value of the dollar and availability of domestic steel, there is no short term relief to these tremendous cost increases. Stay tuned.