Steel Costs Not Seen as Impacting Appliance Buyers
Mar 4, 2004
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The cost of appliances is not expected to increase due to the rising cost of steel. But, over time, the cost of appliances may hinge on the outcome of a smoldering price dispute between steel producers and buyers, analysts forcast.

Steel prices have surged more than 30 percent so far this year on rising costs of raw materials and strong global demand. Prices of other metals, such as copper and zinc, are also up. Not only are base steel prices rising, but mills are also passing through substantial surcharges that have some buyers balking.

"Everybody that's producing with high-grade steel is faced with the prospect of having to pay a surcharge over and above their contract price," said David MacGregor, analyst at Longbow Research.

In the past week, U.S. manufacturers Whirlpool Corp. and Maytag Corp. cited rising steel costs in statements affirming their 2004 profit outlooks, saying they could offset steel increases with other cost cuts.

"Steel is one of many, many pieces that are dealt with in our overall costs," Whirlpool spokesman Tom Kline said. "Whirlpool is looking at the full range of options to appropriately manage all these costs."

Mr. Kline said Whirlpool looks to minimize negative effects from raw material costs through long-term supply agreements, and routinely evaluates alternative materials.

General Electric Co. said in a statement it aims to moderate any impact to its customers and consumers from increased raw material costs by continuing to focus on productivity.

Mr. MacGregor, who conducts a monthly survey of appliance retailers, said though his contacts indicate GE has started discussing price increases with retailers, it would be a few months before consumers see rising appliance prices, if at all.

"Typically, the consumer isn't very sympathetic" to rising material costs, Mr. MacGregor said. "So the expectation that you'll see higher appliance prices may ultimately unfold that way, but probably not until at least the summer."

If appliance prices do rise, the impact on purses may be minimal. Tom Stundza, executive editor of Purchasing Magazine, said that in the past, rising commodity prices have not had too dramatic an effect on consumers. For example, he says a typical U.S. $100-a-ton steel-price increase has added $2 to the end product cost.

The effect of price rises is "more psychological than economic," Mr. Stundza said. (Reuters)

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