Raw material prices have remained largely stable since receding from last year’s historical highs, but labor constraints and other factors continue to affect aluminum extrusion pricing.
Some pricing factors, such as the ongoing war in Ukraine and constraints in the availability of aluminum, are the same as they were more than a year ago when prices were spiking, while others are exerting more pressure.
For example, shipping prices have risen by as much as 40% for some items, said Jamie Barron, Vice President of New Source Corporation. “We have to pass the increases in shipping and logistics costs along to our customers,” he said.
Although customers may not like the higher shipping costs, it is an important increase to absorb given that supply chain challenges have pushed lead times for some materials to more than a year out.
“Some extrusions and materials are delicate and we have to protect them for customers. The last thing you want to do is skimp on packaging after waiting over 90weeks for a part to come in, only to have it damaged,” said Stephanie Barron, New Source Corporation’s Marketing Director and Customer Relations Manager. “Orders have to be packaged appropriately.”
Labor Shortage is a Major Factor
But as noteworthy as shipping increases have been, labor has been the biggest factor affecting aluminum extrusion pricing. “Manufacturers can’t keep full production shifts,” Jamie Barron said.
Ideally, a manufacturer would run 24 hours a day, with alternating three eight-hour shifts. But labor shortages are limiting some manufacturers to two shifts at most.
“If one or two people are out on a shift, then the whole shift is down,” Barron said. “And if the manufacturer hires more people to fill shifts, their overhead costs increase and that means higher prices for customers.”
Employee retention is a growing challenge for the aerospace and defense industry as a whole. Turnover rose to 7.1% in 2022, from 5.7% the previous year, as employees sought higher-paying opportunities.
Competition for labor has grown so intense that aerospace suppliers and plane-makers are competing for skilled laborers. Manufacturers compete with other industries as well.
In Arizona, for example, where many mills are located, manufacturers have been pressured to pay higher wages after workers began leaving to work for Amazon, which has established a large operation in the state. Those manufacturers face the additional challenge of hiring laborers to work in a hot mill, which only gets hotter in the summer.
“In the summer months, it’s almost impossible to hire people at mills,” Barron said, noting that temperatures may rise well into the 90s outside while swelling to more than 130 degrees inside, where materials are melted. “It’s not going to get better at least until fall or winter,” he said.
New Source Corporation is Focused on Helping Customers
New Source Corporation is helping customers lessen the impact of the higher prices caused by the industry’s labor shortage and offering solutions to address other factors as well. For example, customers can place larger order orders to reduce set-up charges.
“If you buy 100 pounds of extrusions you may get a discount but if you buy 300 pounds or more we can completely remove that set-up charge because that is the optimal amount for manufacturers to make an efficient production run,” Barron said.
New Source Corporation also offers vendor-managed inventory services, which allow customers to order large volumes of aerospace-grade aluminum stock and have it delivered as needed, rather than in a single delivery. Not only do customers save money through bulk discounts by ordering upfront, but they can also avoid being unable to find the stock due to the long lead times of new mill runs.
In addition to assisting customers in ordering ahead, New Source Corporation has invested in more holding space and increased its inventory of materials such as aerospace-grade aircraft aluminum extrusions, aluminum seamless tubingand high-performance alloys to help mitigate price increases caused by supply chain challenges.
New Source Corporation has also addressed the industry’s labor challenges by investing in and expanding its workforce so that it continues to deliver quality service to customers as it grows. Not only has it increased its minimum pay and raised salaries across the board, but it has also given employees more paid time off and added more employees from Warehouse Clerks to Sales Representatives.
New Source Corporation has one of the largest inventories of aluminum extruded products, tubing, and other high-performance alloys in the country. Contact us today to learn how we can help you with factors affecting aluminum extrusion pricing.