Mechanical Engineering Blog

4 Tips to Manage Metal Costs Amidst Global Fluctuations

4 Tips to Manage Metal Costs Amidst Global Fluctuations

This post first appeared on Steelscout’s blog.

We all know that keeping on top of material costs and company overheads is fundamental to long-term business success. This is particularly true in the construction and manufacturing sectors. The competition for projects is tough and profit margins are tight. Logic tells us that reducing raw material expenditure can have a major impact in ensuring repeat business from satisfied clients, while at the same time boosting our profits.

But remember: cutting your costs does not mean that you have to compromise on quality.

Past Uncertainty

Prices within the UK metals sector rise and fall depending on changes in the global market. Over the past decade or so, we’ve seen rapid development and industrialisation in the BRICS countries and other regions such as the Middle East cause reverberations in the construction sector and steel industries across the entire world.

To complicate things further, tremendous technological advances in production and dizzying international trade deals have driven raw material costs down worldwide in recent years. This has damaged the steel industry in several countries, including the UK. Recently, the international community has made efforts to stabilise the steel market. It remains unclear how imposed production limits or other multinational agreements to gradually decrease production will affect the prices we pay in the long run. However, since the beginning of 2017, the average global commodity price of steel has risen almost 20%.*

Also, steel cost control policies are not merely a dim and distant international phenomenon. They are a core part of the UK government’s Construction 2025 sustainability strategy. Businesses and buyers that regularly purchase steel will have to adapt to these changes at some point in the near future, if they haven’t done so already. Don’t hit the panic button just yet though!

Reducing purchase costs

Nowadays, buyers of metal across the globe face uncertainty. But what can we do to prepare ourselves for potential challenges ahead? Well, first of all, we can optimise our spending by seeking the most competitive prices for metals.

If metal buyers adopt strategic cost control measures now, potential problems in the future will be far less disruptive. Here are five practical tips for doing so:

1) Get quotes online

We all have our favourite suppliers. Sometimes it can seem like more trouble than it’s worth to start ringing around to find a better price — particularly if it means setting up new payment terms or getting used to unfamiliar ordering and invoicing systems. But the rise of digital technology and the Internet has changed the game. The process is now a whole lot easier and quicker online. Just as you can build your own quote on an insurance comparison site, you can do exactly the same thing when buying metal. You can build your material list online in minutes and get multiple quotes from a number of local suppliers in your online account.

2) Buy in bulk wisely

You might think that bulk discounts are obvious cost-cutting measures. But remember that when it comes to heavy and bulky raw materials, consider the bigger picture before signing off on a large purchase. For instance, discounts mean little if too much capital becomes tied up in stock – especially if inflated delivery and storage charges turn those initial savings upside-down. Still, if you can purchase by the tonne and justify the inventory, it offers significant savings overall.

3) Finish steel in-house

Self-colour steel is significantly cheaper than finished steel, and it still provides acceptable levels of durability and safety. However, should you need coated steel, be sure to weigh up the various purchasing options available to you. Paying a premium to suppliers makes little sense if the project does not require large quantities of coated steel. Often, it can be more cost-effective to source raw steel and then coat it yourself.

4) Reduce waste

In most projects, there is a tendency to base entire budgets around minimising the use of the most expensive production component. But, experienced planners know not to lose sight of the forest for the trees. Cheaper yet high-volume components are crucial cost factors too.

While metal prices have remained relatively low, project managers often overlook surplus as wastage. If you are finding yourself with piles of scrap at the end of a job, it could be time to reassess the planning process that comes before a project.

The Future Is Bright

Materials can account for the majority of costs on some projects, taking up an estimated 70% of the costs on a large-scale construction project for example. If you apply these four practical measures, and you could see a major impact not only on your total costs, but on the long-term viability and success of your business.

https://tradingeconomics.com/commodity/steel

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