For plastics machinery manufacturers and screw makers, steel pricing is no longer the steady, predictable friend of the past - prices are moving up, and quickly.
Steel prices have jumped 10-50 percent since the first of the year, according to several equipment makers interviewed in mid-March. Some said suppliers are granting only short-term price guarantees and tacking on special surcharges.
Although steel prices account for only a fraction of the cost to produce a complex product such as an injection molding machine, uncertainty about steel pricing is coming just as plastics machinery appears to be emerging from a three-year slump.
``It's steadily been going up over the past couple of months. It's just really becoming an issue, because it's rising higher and higher,'' said Christopher Filos, president and chief executive officer of the HPM Division of Taylor's Industrial Services.
The Mount Gilead, Ohio-based HPM has seen prices increase on many types of steel it buys for its injection presses, extruders and die-casting machines, such as plate steel to make machine bases and bar stock used for tie-bars. Bar stock has jumped 40 percent.
Filos said steel increases mean machinery companies also will face higher prices for components, such as cylinders and valves. ``But in this very, very competitive industry, it's difficult to pass that on to the industry,'' he said.
When the Bush administration rolled back steel tariffs ahead of schedule in December, that was supposed to ease steel prices. Instead, the reverse happened, thanks to a powerful combination of global economic forces.
Historically, steel has been a stable commodity. In recent years, prices of U.S.-made steel had been way down, because the domestic industry was plagued by too much capacity. But bankruptcies and consolidation have reduced the number of U.S. steel makers.
China is a big factor, according to steel industry analysts. China's explosive economy is gobbling up steel from around the world, including scrap steel that so-called mini-mills turn into new steel. A weak dollar makes U.S. steel cheaper on world markets, boosting exports. Energy costs are high. The result: less steel on the market and pumped-up prices.
Glycon Corp., a screw maker in Tecumseh, Mich., started to see prices rise in early March, said President Jeffrey Kuhman. Glycon has long-term supply contracts, but steel suppliers are tacking on surcharges. ``They're not protecting you beyond 30 days,'' he said.
Steel accounts for about 10-20 percent of the cost of making a screw, Kuhman said. The price hike ``comes right out of our pockets, because we can't pass it on,'' he said.
Steel prices have increased about 30 percent since late 2003, and are ``volatile,'' said Robert Jackson, president of blow molding machinery maker Jackson Machinery Inc. of Port Washington, Wis. ``We're looking at, literally, daily price changes.''
Auxiliary equipment maker ACS Group started noticing steel increases in the fourth quarter of 2003, when stainless went up, said President Tom Breslin. Other types of steel jumped in the second week of January. ``They've been going up every three to four weeks, but it's slowed a bit in the recent few weeks,'' he said.
``We've seen anywhere between 15-50 percent increases, depending on the type of steel we use'' since Jan. 1, Breslin said.
The Wood Dale. Ill.-based ACS has responded by buying larger quantities ahead, to lock in prices. ACS also keeps a close eye on the spot market.
Some companies reported that their steel prices have remained steady, at least for now.
``We really haven't experienced any significant increases,'' said Ernie Plasse, vice president of manufacturing at Davis-Standard Corp. in Pawcatuck, Conn. He said the maker of extruders and blow molding machines changed steel suppliers, when one supplier wanted to raise prices.
Davis-Standard also negotiates longer-term contracts, to keep prices steady. Plasse said steel only accounts for 1-2 percent of the cost to build a machine.
Several U.S.-based toolmakers said they have not yet seen a corresponding increase in the price of tool steel. But some said they expected to see a hike in material costs, as the increases wind their way through the system.
The P20 grade of steel, the main material in a majority of injection molds, has not gone up dramatically in price, said Daniel Hess, president of Paragon Die & Engineering Co. of Grand Rapids, Mich.
However, because of limited availability, steel suppliers have started quoting prices that are only good for 24-48 hours, Hess said. Mold makers must either buy in bulk quickly or face uncertainty on whether the price will rise or steel will be unavailable for purchase, he said.
Some mold makers are more concerned about a potential shortage of steel than about price hikes, he said. The warnings of limited supplies have started coming in the past few weeks, Hess said.
``Due to current steel market conditions, they're telling us that the price and supply is subject to change after only a few days,'' Hess said. ``So far, it's hasn't been problem. But the concern is getting [steel] so we can meet the short lead times asked by customers.''
Steel for secondary tooling uses, such as mounting plates, has increased by 5-10 percent, Hess said. But base steel used to make a mold's core and cavity has not gone up accordingly, he said.
For large molds, such as those for automotive exterior parts made by Paragon, steel can account for 30-40 percent of the entire cost of tooling, Hess said. ``It's a big part of our business, so we have to watch it closely,'' he said.