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Where have all the flowers gone? Gone to Iraq, everyone...
Prices are about to take a jump, the result of a scarcity of raw materials. Batten Down the Hatches, Boys. Here comes INFLATION!!
Source: The TIP, NY Times, 2004-02-27
Candidate: Big Business
The unnecessary and very expensive war in Iraq, brought to us courtesy of Bush & co. and the consequent reconstruction, is costing Americans a lot more than the $87 billion price tag Congress agreed to pay.
Rebuilding bridges, roads, schools and hospitals, homes and public buildings in Iraq diverts the natural resources, raw materials, that Americans depend on for our own infrastructure, raising the prices we pay for everything from homes to automobiles to foods.
Sabotage of Iraq's oilfields by those attracted by the post-war anarchy and intent on disrupting the world economy ("Better to fight them in Iraq than here in the US") is also causing oil shortages already relfected in rising pump prices. Hikes in oil prices will increase costs of plastics, too.
This report appeared in todays New York Times. An interesting, if short-sighted appraisal of the situation. More trouble to come, folks.
Surge in Metal Prices Squeezes Pricing and Profits
By BERNARD SIMON
Like many businesses that use steel, copper and other metals in their products, Mary Jane Gilbert's roofing-materials company in Phoenix is in a fix.
Ms. Gilbert, the joint owner of JB Roofing, sells to home builders, and she has quoted firm prices for roofs on more than 500 homes that her customers have sold but not yet built.
But in the weeks since she committed herself to those deals, Ms. Gilbert's suppliers have notified her of price increases of 10 percent to 20 percent on metal roofing components like valleys, edges and vents, and they say that another increase is likely in April.
With the selling price of the house already fixed, it is too late to pass along those increases. "We're caught in the middle," Ms. Gilbert said. "The builder is also caught in the middle."
Though analysts do not expect the recent spurt in the prices of raw and some processed materials to have much immediate effect on overall inflation, the increases are a big headache for businesses like Ms. Gilbert's.
"Everybody who buys a steel part is impacted," said Charles Hageman, executive director of the Forging Industry Association, a trade group in Cleveland.
Ana Lopes, director of government relations at the Motor and Equipment Manufacturers Association in Research Triangle Park, N.C., said, "This is something that has come about very quickly, and with great force." Ms. Lopes's group speaks for the auto parts industry, a big user of steel and other metal.
In the home construction industry, "more homes are being sold before materials are purchased so builders are taking a risk," said Michael Carliner, chief economist at the National Association of Home Builders in Washington.
That risk has become larger. The price of copper - used in electric cables, plumbing and a variety of other industrial and construction applications - soared to an eight-year high of nearly $3,000 a metric ton on the London Metal Exchange last week, almost twice the level in June. Nickel, used in stainless steel, has more than doubled in the last year.
Other commodities, like coal and iron ore used in steel making and lumber for home construction, have also risen sharply; so has steel scrap, an alternative material for steel making.
According to American Metal Market, a trade publication, the price of hot-rolled steel, one of the most widely used types, has soared by more than 80 percent in the last year, and by almost half since December; it now sells for about $480 a ton. Many steel makers have also begun to impose surcharges, typically around $40 a ton, because of the high prices of their raw material.
And they are becoming increasingly reluctant to quote prices for future delivery, Mr. Hageman said, adding that with domestic demand picking up, "this is just the wrong kind of news."
"Just when you need more steel,'' Mr. Hageman said, "the supply is cut short."
His association and several steel manufacturers have asked the Commerce Department to consider limiting American exports of steel scrap in hope that increasing the amount of scrap available to domestic mills will help moderate price increases on new steel.
Analysts ascribe the upward pressure on the price of materials to surging demand in China, abetted by a pickup in economic growth in the United States and by the weakness of the dollar. International metal prices are typically set in dollars, and foreign producers must raise dollar prices to cover their costs when the currency weakens.
In the case of some metals, notably nickel, a lack of investment in new production capacity has also limited supplies.
The jump in metals prices is hurting some businesses and consumers more than others. Mark Lynskey, chief executive of the American Bicycle Group in Chattanooga, Tenn., said that retail prices of his company's bikes, made mostly from titanium, aluminum and carbon fiber, an oil-based material, are likely to rise by about 20 percent.
"Short term, we may have to absorb some of the increases," Mr. Lynskey said. "But in the long term, it will have to pass through to the consumer."
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