The Good and the Bad of Higher Raw Materials Prices

We all get excited when economic conditions improve both at home and abroad. Seeing construction projects and new factories taking root around your community brings a wide range of economic benefits to you and your neighbors. In order to fuel an economic rebound, you need raw materials, especially metals and alloys. As the demand grows for finite materials, so do prices. Currently, many of the raw materials that make up the products we offer at Ed Fagan are rising in price, some quicker then others. Let’s take a look at a few of these raw materials and see why their prices so high.

Nickel

As of May 13th, nickel was trading on the London Metals Exchange for $21.625 per metric ton, according to Bloomberg. That is not only a two-year high, but also nearly double the price of nickel a decade ago. There are two major reasons for this recent jump[1]. First, the world’s second largest nickel producer, Singapore, put export restrictions in place at the beginning of 2014. The second reason revolves around the political unrest in Ukraine. Russia produces roughly 16% of the world’s nickel, and their unpopular actions in Ukraine have worried world markets. All of this adds up to higher prices for products that rely heavily on nickel like stainless steel. Many manufacturers are taking preemptive action by stocking up on stainless steel in case prices continue to rise.

Cobalt

Over the past six months, cobalt prices have risen after years of declines. One of the main factors in this recent rise is the fact that cobalt is used in a vast array of high-tech products. Everything from the semiconductors that power your phones and computers to the batteries in electric cars rely heavily on cobalt.[2]

Molybdenum

Due to the classic combination of greater demand and tighter supply; molybdenum prices recently hit a 21-month high. Why is this price jump such a big deal? It turns out that 60% of the world’s supply is used in the production of structural and stainless steel.[3]

While these are just three of the world’s major raw materials, it would be hard to imagine the global economy without vast amounts of them. It is also the case that when their prices rise, so do the prices of the products they make possible. So if you experience some higher-priced raw material this year, understand while it might take a bite out of your bottom line, it is sign of a healthy and growing economy.

[1] http://www.insidefutures.com/article/1210323/American%20Investors%20Safe%20from%20Nickel%E2%80%99s%20Boom%20and%20Bust.html

[2] http://blogs.wsj.com/digits/2014/05/13/applied-materials-says-cobalt-is-key-to-future-chips/

[3] http://www.fastmarkets.com/minor_metals/74895-0-en

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This entry was posted in Machining Alloys, Manufacturing, Raw material prices, Specialty Alloys and tagged , , , , , . Bookmark the permalink.

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