Worth its Weight in Gold

May 5, 2004 - A contractor friend was recently commenting about the price of steel, complaining that some particular pieces had almost doubled in price. Additionally, quotes from steel suppliers are now only good for two weeks. I would think it would be hard to turn a bid around that fast!

Indeed, steel prices are skyrocketing and everyone is feeling it. Some blame the current administration for installing huge steel tariffs. Others blame the huge demand the Chinese have placed on the world supply. Nevertheless, it is a reality we must deal with.

Think about that piece of equipment on which your livelihood depends. I would bet that as much as 99% of the machine's cost is driven directly by steel prices-even the tires have steel belts in them.

Last issue, I wrote about the trend to higher priced used equipment. Not long after, I was contacted by a couple of overseas companies looking for used Skyjack scissor lifts and JLG boom lifts. Curious about what they found, I followed up, only to learn that the equipment they wanted was virtually impossible to find.

The shortage of used equipment is compounded by the fact that organizations are holding on to iron a little longer. But the real crunch is the lead times manufacturers are facing for delivery of new machines. After years of lean times, manufacturers like I-R, JLG, Terex, and others are finally looking at very fat order books.

Big backlogs are their own dilemma. We work in a seasonal business, and we are smack dab in the middle of the peak season. OEM's are faced with something they have not had to deal with in years: vendor shortages. These days, engines, tires, drive motors, hydraulic components are all outsourced. It takes time to ramp up to the sudden spike in demand. Take batteries, for instance. A leading battery supplier to the lifting industry is only able to deliver a portion of the increased demand for batteries because lead, which is used to make internal plates, is hard to come by and very expensive.

The rise in steel prices and decline in available equipment could not have come at a worse time. Equipment owners' plans to update or add to their fleets are delayed . In turn, they can't really afford to turn loose of that used machine.

This scenario translates into a textbook supply-and-demand lesson. If the situation continues as it is now, it may not be long before that piece of equipment will be worth its weight in gold.