IRVINE, Calif., (April 18, 2005) — Higher steel and other materials costs are likely to mean higher component and vehicle prices, but eventually the industry prices will start to plateau, truck component suppliers predict.

Eaton Corp. Senior Economist Arun Raha says two key factors drove last year’s steel price hikes: Production capacity declined when prices were low, then demand shot up with rapid growth of world markets — especially China. “My guess is that prices will level out,” he says. It’ll take a while, adds Raha, but more capacity is coming on line and China is trying to slow its growth.

Says Tom Gosnell, ArvinMeritor vice-president of Commercial Vehicle Systems: “The momentum behind the steel economics is still in place. We still have a global supply shortage.

China will continue to be a net importer of steel over the next few years despite its own capacity expansions & prices won’t subside until there’s a significant drop in global demand, he says. Also, consolidation has been rampant in the steel industry, which will impact future prices.

Gosnell says ArvinMeritor has beefed up resources in its materials analytical group, looking for alternatives to high-cost ferrous metal. They’ve made some alloy changes but “we’re not going to sacrifice product quality,” he insists. Working with Liteflex, ArvinMeritor is also pursuing the use of composites for some components, but that answer to high steel prices could be years away.

Meanwhile, at least some of the added costs will have to be passed on. “This is a global issue,” Gosnell says.” It’s more than North America and more than the commercial vehicle industry. It’s global, economy-wide, and there’s no single point in the supply or value chain that can absorb these economics. It has to flow through to the ultimate consumer of goods.”

Prices are up for many other metals, like copper & nickel, also for plastics, tires and other products affected by high oil prices. Already this year, prices on most truck tires have gone up 36 percent. U.S. Dept. of Labor’s January price index for heavy trucks was up 1.6 percent from December and 2.7 percent from January ’04. Trailer prices were up 0.3 percent for the month, 8.5 percent for the year.

— from Heavy Duty Trucking