Chain Reactions

Steel Crazy After All These Years

One of the surest signs that the economy is recovering is the inevitable rise in the prices of raw materials. This is hardly news to any manufacturer who uses steel in their products, since the price of flat-rolled steel has gone up no fewer than six times just since November 2010, representing a hike of between 20%-30%, according to the Wall Street Journal.

The WSJ reports that appliance makers like Whirlpool are compensating for the price hikes by increasing the prices of their own products by 8% to 10%. Somewhat incongruously, though, the reporter seems to think consumers won't necessarily notice the higher prices since manufacturers would be likely to absorb the costs themselves, rather than risk alienating a still-skittish-from-the-recession customer base.

And that could make for a very ticklish situation, as another WSJ article illustrates. Whirlpool and Electrolux, another home appliance maker, say they're committed to raising their prices later this spring, which could cost their dearly in lost market share since their Korean competitors are planning on absorbing the rising costs of steel rather than passing some of it along to their customers. The home appliance marketplace is down more than $1 billion since 2007, and although the industry as a whole is expected to rebound somewhat in 2011, consumers were trained during the recession to hold out for deep discounts.

The question for Whirlpool mirrors the situation for many U.S. manufacturers: Will their offerings of innovative new models offset the fact that their overseas rivals can offer basic models at much more consumer-friendly prices? For appliance makers, that indeed is the billion-dollar supply chain question.

TAGS: Supply Chain
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