Sponsored By

July 1, 2004

3 Min Read
Steel weighing heavily on minds

Mold- and machinery makers struggle to hold the line on prices as runaway steel costs cut deeper into their bottom lines.

Still reeling from skyrocketing resin and energy prices, the U.S. plastics industry is now being stung by rising steel prices. The limited supply and increased demand for steel has resulted in higher costs, which are beginning to be passed through the supply chain.

"Steel prices and natural gas prices are hurting plastics manufacturers," says Darren McKinney, a spokesman for the National Assn. of Manufacturers (NAM; Washington D.C.). "Both commodities are wreaking havoc throughout much of our membership."

Steel prices jumped 5% to 50% this year, depending on the material and quality, analysts say. If the supply-and-demand balance is knocked off kilter, it could lead to further price hikes.

"Steel is in short supply due to strong demand in China, increasing domestic demand, and the high cost of natural gas," says B. Patrick Smith, president, Maguire Products Inc. (Aston, PA), a maker of blenders, loaders, feeders, liquid color pumps, and dryers. Maguire has seen its steel prices rise 10% to 30% the past six months.

Moldmakers and equipment providers have been particularly hard hit. For instance, a high percentage of tool steel used in the U.S. is imported. Some say prices for certain steels have varied by up to $100/ton between the U.S. and other countries.

"Some specialty steels have gone up more than commodity steels," says Robert Grumski, director, strategic sourcing, North American machinery, Milacron (Batavia, OH).

"We''ve had to absorb a considerable amount of those costs."

Commodity steel represents about 10% to 15% of the materials used to produce an injection molding machine. But that figure fluctuates depending on how complex the equipment is. For example, "you have castings, which have steel inputs," Grumski points out. "There are valves and hoses, so rising steel prices could potentially impact all components of the machine."

Industry members say they''re rolling with the punches, doing everything they can to nullify the impact on customer pricing—including cost-reduction initiatives. "We don''t have much choice," says Pete Manship, president at the American Mold Builders Assn. (Roselle, IL) and Mold Craft Inc. (Willernie, MN). "Everyone around the world has the same problem." Options are limited for moldmakers serving the injection molding industry because most molds are made from steel.

Companies are seeking alternative sources of supply and, in some cases, less expensive substitute materials. "We are competitively bidding on commodities to lower our costs and we''ve had some success there," Grumski elaborates. "We''re also looking at [purchasing steel from] low-cost countries in areas such as the Asia Pacific."

Processors and moldmakers who produce smaller parts, such as for medical devices, are less affected because they purchase less steel. "The labor costs more than the steel," notes Stephanie Harkness, chairman and CEO at Pacific Plastics & Engineering (Soquel, CA). "We make precise parts with very tight tolerance, so there''s an awful lot of artistry that goes into producing that part in a mold. We refuse to use aluminum because we don''t get the tolerances we need and we don''t get as many shots out of it."

By Greg Valero

Contact information

American Mold Builders Assn.  

National Assn. of Manufacturers  

Milacron  

Maguire Products Inc.  

Sign up for the PlasticsToday NewsFeed newsletter.

You May Also Like