It should be an ideal commodities scenario for some appliance companies. While economies around the world have been sputtering, in the U.S. and some other countries consumers have been avidly scooping up major appliances, air-conditioners, digital cameras, and other consumer goods. Because of lackluster world economies, you would think that the materials used in these "hot" appliances should be readily available and relatively low priced. In fact, that isn't necessarily so.
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Photo courtesy of Outokumpu Copper Franklin. |
One big reason is that, despite talk of a global economy, there are national and regional differences in commodity supply. For instance, despite worldwide overcapacity, steel supply and pricing in the U.S. have been affected by tariffs imposed early in 2002, and by the temporary shutdown of some domestic supply. Another factor is sometimes higher oil and natural gas prices. Primary glass suppliers, for instance, are adding surcharges tied to a natural gas price index. And, not only are oil and natural gas used in processing and transportation, but they are used as constituents in some plastics.
While looking at the bigger picture is helpful, the reader has to remember that the raw materials appearing in appliances often pass through one or more intermediaries. These may turn copper into pipes, steel into coated coils, various feed stocks into plastic resin for refrigerator liners, or raw glass into pyrolytic oven door glass. Other companies are primarily involved in distribution. To give a better picture of how appliance companies are being affected, this report includes input from companies that directly supply the appliance industry. Copper Supplies Adequate
Copper prices toward the end of the year were fluctuating around U.S. $0.72 a pound, somewhat higher than a year ago. Geoffrey Palmer, president of Outokumpu Copper Franklin (Franklin, KY, U.S.), reflects that 2002 was a strong year for copper tube demand, with high residential housing completions, and a hot summer stimulating air-conditioner sales. "Although there are more than the usual number of uncertainties, we look for 2003 demand to be flat. We don't foresee any shortages in the supply of copper or of tubes."
For aluminum, suppliers are faced with overcapacity and low prices brought on by the weak global economy. The situation is complicated by new capacity in China, which has made it a net exporter rather than a net importer. In the U.S., the National Association of Aluminum Distributors estimates that aluminum shipments will increase 4.6 percent in 2002 and 6.8 percent in 2003.
"The demand for die castings this year improved over the previous year, but is still soft compared to demand in the late '90s," says Daniel Twarog, president of the North American Die Casting Association. "Future demand for magnesium die castings will increase, aluminum will be about the same as 2002, and zinc demand will decrease slightly. Pricing has been stable over the past three years with the exception of downward pressures being placed on suppliers to the automotive industry. Because of the soft demand, prices are not expected to increase in the near future. On the supply side, there is excess capacity in the industry at this point.
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