Steel prices will affect equipment costs says manufacturer

Related tags Stainless steel Steel

The rising cost of stainless steel has led one food equipment
manufacturer to warn customers it will soon be increasing prices
for its products.

A&B Process Systems warned customers this week it would not be able to provide bids and quotations to potential customers until the turbulence in the market dies down. It would also have toreview the delivery times for delivery of equipment, the company said.

"Unfortunately, due to the present volatility surrounding the surcharges on stainless steel materials, A&B believes that it must reserve the right to review the pricing in allquotations,"​ the company said.

The company provided an analysis of the stainless steel market to prove its point. It cited increasing demand by China for raw materials used for making stainless steels, the current devaluation ofthe US dollar, deficits in the supply of nickel and the closing of a large US plate production plant as factors that have contributed to the volatility in prices.

Stainless steel suppliers are currently only guaranteeing a price for only five days and in some cases, for even shorter times. The surcharges being applied have also increased markedly forstainless steels. Lead times for sourcing stainless steel has also risen to 12 weeks from 10 weeks for commodity materials and to 16 weeks from 12 weeks for specialty steels.

In addition to China demand has increased substantially in the US, Europe and Korea . As a result China and several other countries have limited the export of raw materials used in the productionof steel such as iron ore and coke. In early December 2003, China had become the first country to produce over 200 million tons of raw steel in a year, representing a growth of about 66 per cent sincethe year 2000. China is now the world's largest producer of steel.

As a result China is importing large quantities of scrap iron, depleting the global resources and consequently driving up the price. Scrap iron prices have increased three-fold in six months.

The cost of other raw materials has also escalated over the last 18 months. The average annual price of nickel metal increased to $7.27 per pound in the first quarter of 2005 from $2.70 per poundin 2001.

Austenitic-type stainless steels contain 18 per cent chromium and eight per cent nickel. These types of steel are used extensively in the manufacture of equipment for the chemical, pharmaceutical,biotechnology, dairy, food and beverage industries.

Although present in low amounts in these stainless steels, the price of nickel largely determines the price of the steel. Nickle makes up about 60 per cent of the cost of steel manufacture. About66 per cent of all nickel mined and produced is made into steel.

Inco, the world's largest producer of nickel, cannot currently ship the metal from its source in Norilsk, Russia due to flooding of the Yenisei river. Inco has also announced that it willclose the Copper Cliff smelter to complete repairs.

At the end of 2001 Allegheny Ludlum closed a major stainless steel facility in Houston , Pennsylvania , reducing melt capacity in the US by about 250,000 tons. Twelve months later, AlleghenyTechnologies, one of the largest and most diversified producers of specialty steel in the world, closed its' plant in Massillon,Ohio, which was used for the production of stainless steel plate.

"The steel industries in the US also face higher manufacturing costs, due in part to higher energy and transportation costs as well as the rising cost of healthcare for employees,"​A&B stated.

A&B Process Systems makes stainless steel equipment for use in the processing industries.

Related topics Processing & packaging

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