Jim Roach Executive V.P., Tri-Star Metals Carol Stream,Ill.

During the recent Precision Machining Technology Show (PMTS) the Production Machining editors spread out over the show floor to ask several materials vendors about what they see regarding the shortage of some raw materials for metalworking manufacturing. We also wanted to know if they had any suggestions for how their customers might deal with shortages ongoing

PM: Why is there a materials shortage?

Generally, the vendors we spoke with told us similar tales as to the genesis of the shortage. The mills cut back in 2008 and 2009 and have been slow to increase capacity to previous levels.

In anticipation of shortages, we are sitting on the largest inventory position ever. We have seen the value of that strategy come to fruition as leadtimes have been extended. As a stainless and nickel alloy distributor, we have definitely seen the mills pushing deliveries out in 2012—some as far as March of that year.

Demand has increased, but the mills, running at their current capacity, are still below what they could be. Basically, they seem to be waiting for signals of sustained volume well into next year before they optimize their production capacity. If and when additional capacity comes on line, leadtimes will shorten, but we believe that will likely not occur until 2012.

The mills are trying to manage their businesses prudently—it’s a more complicated process than simply flipping a switch to bring on additional capacity. After the rapid downturn of the recession, the mills are not going to jump into anything they perceive might be a blip. They are looking for sustained demand.

PM: What kind of strategy should shops pursue in the current environment?

Most of the companies we talked to agreed that the best strategy is establishing or maintaining a close relationship with the supplier community. Basically, this translates into more transparent communication between the shop and vendor. For example, being forthcoming as to projected business levels further out than usual will help the vendor plan its buying from the mills so shortages can be mitigated somewhat.

I’d say the first thing is to be as close as you can to your suppliers. I don’t think it’s a good time to buy a great deal of metal and lock in at a firm price at these levels. There still is the possibility that the dollar may strengthen, and some new nickel sources may come on line so prices may flatten or go down. Although volume may be higher in 2012, prices could be lower, which would be an interesting concept.

But being assured of having availability of material and having someone you can count on means it’s important to firm up your alliances now and get people on board. The more information our customers share with us, the better supplier we can be. We can’t anticipate their need if we don’t know what is going on. It is sometimes a painful conversation for my company, but there are occasions in this environment we will pass on 100 percent of a customers business in favor of advising them to spread the risk among other suppliers. To be a good partner for the customer, I think you have to accept some competition. Transparency is cornerstone for the alliance and partnership between supplier and customer.

The more we can know and the further out we can project tonnage demand, the sooner the mills will feel comfortable that there is enough sustained demand to add capacity. It’s not about locking down the price because that will float; it’s more about sharing anticipated material requirements to assure sustained supply. More notice is better, so the material won’t run out.

Video Preview:
See Our New Wire Drawing Equipment In Action

Tri Star Metals is looking forward to attending this show and meeting customers, new and old. Please stop by our booth to speak with one of our highly trained salespeople and let us know how we can be of assistance to you. Tri Star Metals has global sourcing capabilities and can produce material to custom lengths, tolerances, and finishes for all your stainless, aluminum, and nickel alloy requirements.

We will be located at booth 464.

Video Preview:
See Our New Wire Drawing Equipment In Action

Tri Star Metals is looking forward to attending this show and meeting customers, new and old. Please stop by our booth to speak with one of our highly trained salespeople and let us know how we can be of assistance to you. Tri Star Metal has global sourcing capabilities and can produce material to custom lengths, tolerances, and finish for all your stainless, aluminum, and nickel alloy requirements.

For all our customers that will be attending the show, please contact your sales representative for information on how you can attend the PMTS 2011 show for free.

We will be located at booth 1213.