Steel fluctuation spurs design, material changes

Companies are simplifying new models to minimize the use of the metal and reduce cost pressures in case quotes rebound in the months ahead.

China suppliers of steel-based products remain cautious about implementing any price increases, despite the global economic recovery. As such, the steel cost hikes in March and April encouraged variations in structural design.

Manufacturers of kitchen knives are replacing fully stainless steel models with versions that have wooden, bamboo or hollow stainless steel handles. Pakka wood, which has more finishing options than natural versions, is also adopted. Because it is subjected to intense heat and pressure, the material is highly durable and moisture-resistant.

Furniture makers are cutting down the size and features of releases as a way to minimize costs. The length of office tabletops is reduced from 1.8 to 1.6m. Steel file cabinets are made with fewer drawers. Such modifications can decrease final product prices 5 to 10 percent.

Trends in iron furniture also reflect the modest aesthetic. Simple geometric shapes are replacing complex figures that used to be popular in the mainstream market.

Even companies offering security products have been able to incorporate less of the metal in releases. Mechanical and electronic safes, for instance, are fitted with 2mm-thick cases and 5mm-thick doors. Security doors employ S-shaped keels, which cost less than grid versions.

Unlike with kitchen knives and furniture, they do not perform as well as conventional variants. Although priced about $7 less than models with 6mm-thick cases and 12mm-thick doors, the thinner safes are not as resistant to cutting and drilling. Grid-shaped keels are more durable and provide better security as well.

Despite their best efforts, a number of companies have no choice but to implement commensurate price adjustments whenever the cost of steel increases. These include factories that cannot substitute current materials with less-expensive ones, such as those producing steel coils and pipes, hand tools, and fasteners.

More than 90 percent of the material outlay for coils and pipes is based on steel. When costs started escalating during Q4 2009, steel coils and pipes manufacturer Suns Steel Intl Trading Ltd had to adjust quotes 10 to 15 percent.

Suppliers of hand tools and fasteners, meanwhile, attribute 40 to 100 percent of their material expenditure to steel. In this industry, every 300 yuan ($44) rise per ton results in a 5 to 10 percent increase in finished product prices.

Led by the jump in iron ore costs, steel reached record highs in March and April, rising 10 percent for stainless steel and 15 percent for structural steel. Shanghai SteelHome Information and Technology Co. Ltd general manager Wu Wenzhang attributed the spike to the supply monopoly from Rio Tinto, Vale and BHP Billiton. Global output of iron ore is also on the rise, but Vale's production is recovering slowly and still cannot meet growing demand.