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View Full Version : copper/brass/aluminum prices on the rise


Alan B
01-28-2010, 05:48 AM
Some interesting industry notes from the manufacturing side of the business...

Commodity prices have doubled in the last year. More specifically in the last 12 months the spot price per lbs of the raw material has increased from:
-aluminum $.60 lbs to $1.20 lbs
-copper $1.50 to $3.25 lbs
-(brass is copper alloy and tied closely to the copper prices).

Note that copper only costs ~2.7 times aluminum ($1.20 vs $3.25), however copper weights over 3 times as much for the same volume. Accordingly a copper or brass fixture has 3 x 2.7 = ~ 8 times as much raw material cost compared to if the same fixture were made from aluminum.

This points to you seeing potential fixture price increases for copper and brass fixtures (and to a much lesser degree aluminum fixtures). Also potential price increases for cable and transformers. As an extreme example, 1 spool of 500' 8/2 superflex cable weighs 83 lbs (probably 20lbs of that is pvc and the spool), leaving 50 lbs of copper x $3.25= ~$150 of raw copper billet cost before you even manufacture the wire.

As they say there are lies, dam lies ...and then there are statistics. The other side of the coin is metal prices are now where they were historically (they dropped 50% about 1.5 yrs ago).

My thoughts are in this econ, manu's will have a hard time raising prices, instead it will just squeeze their margins more, and you'll see more pushing of aluminum fixtures over brass since their material costs are 8X's less. Cable and transformer costs will increase alot because they have little margin to begin. LED will benefit from the latter (decrease need for cable and large transformers).

I strongly believe in brass fixtures over aluminum (if you can't tell from our site:rolleyes:). I hope the material price increases does not increase the use of aluminum fixtures.

Cheers!

Alan

INTEGRA Bespoke Lighting
01-28-2010, 11:49 PM
When the recession 'hit' global commodity prices took a nose dive. Did we see any reduction in the cost of fixtures? Of course not. In many cases manufacturers actually raised prices. Now metal commodities are back on the rise and I can guarantee you all we will hear is the need to raise prices. Same thing holds true for currency exchange rates. When the CDN $ was at 0.65 USD we had to pay so much more here to cover the exchange rate. When the CDN $ soared up to 0.95 - 1.05 USD we saw only modest (about 10%) reduction is prices.

Alan B
01-29-2010, 05:21 AM
James,

I completely agree with you. However unfair, the margin was kept when commodity prices went down and still manu's and distributors were going out of business, and still are in a tough situation. Now with costs going up substantially over the last year (even though they are where they were 3 years ago), the added pressure to weak companies will force them to either try to raise prices or move to more aluminum. My bet is with the push for LED's and given LEDs already cost more than traditional lamps, they will move towards more aluminum fixtures.

On another note that is a little disturbing for the overall economy and business climate (one that I think will have a major effect) is how banks have stopped lending. The Fed has significantly reduced interest rates to banks to encourage lending, but instead banks are using the lower rates to make more profit off existing loans (instead of making new loans). The reason is they are in such poor shape that they needed to build their own cash reserves (i.e. not lend any money even if its profitable, quality loans to credit worthy, collateralized, or guaranteed loans). It's very analogous to what you mentioned. This factor will prevent many co's from surviving this downturn, and will prevent many small business from growing. Cash will continue to be more important.

Be careful with your cash because its almost impossible to get more from except your own business profits.

Sincerely,

Alan