Overlooked amid the meltdown of the financial industry was the cooling of speculation in metals that had driven prices to record levels. Gold, which touched $1,000 per ounce at one point in 2008, was simply the most visible of an array of industrial metals whose rising costs began to impact those who manufacture, sell and use metal stage gear such as aluminum trusses and steel catwalks. The least visible metal, however, was copper, which was disappearing from construction sites, HVAC installations and the roofs of homes and businesses at an alarming rate last year. Ironically, one of the very companies with a highly vested interest in how the metals market played itself out was Gemini Stage Lighting, which had the copper tubing to the air conditioning units atop its building in Dallas stolen on three separate occasions.
That kind of incident underscored the rapid appreciation in raw metals costs that took place early last year, driven by the kind of “perfect-storm” confluence of factors, including a U.S. dollar that fell for most of the year, a commodities market fueled by speculation and leverage and, for much of the year, by transportation costs and scarcity, as economic engines like China and Russia were still expanding their infrastructure until the credit meltdowns put an end to that early in 2008.
Driven by these factors, the cost of key metals, including aluminum, rose last year. But thanks to that other “perfect storm” of toxic mortgages and other exotic financial products that undercut the foundations of international finance, prices for metals like copper, aluminum and zinc have undergone a massive correction in the previous quarter due to a huge drop in demand. That’s prompted some companies that supply metal staging and lighting equipment to review their own pricing on a monthly basis, versus the usual annual price reviews. At the beginning of the year, truss builder Xtreme Structures in Sulphur Springs, Texas, announced a “temporary” price decrease of up to 10 percent as aluminum costs hit a six-year low. In a statement, the company’s vice president of production, Matt Panther, stated, “Although some costs, including labor, have continued to go up, aluminum, our primary material, has dropped through the floor.” Panther went on to state that he couldn’t predict how long the price cut could stay in effect, given the dynamic nature of metals and other commodities markets.
Gemini Stage Lighting, like others in that market, watched as vendors hiked prices incrementally over the last two years. “It seemed that where we used to get a price increase once a year, we were getting incremental price increases every other month,” recalls Jerad Garza, sales manager. “It got to the point where that had to be factored into any large bids that might evolve over time, letting customers know that any prices you quoted were only good for a limited period of time. You couldn’t keep a price list stable for a year; you had to have a running list that was constantly updating.”
That phenomenon prompted some customers to look to the used equipment market, purchasing from rental houses and from dedicated Web sites like lightbroker.com. “It awakened a value consciousness in the customer,” says Garza.
Global Truss, a truss maker based in the Netherlands which entered the U.S. market more aggressively recently, has countered the rising commodity prices by moving its manufacturing in China. The lower manufacturing costs there more than offset the shipping costs, says Ken Kahn, Global’s general manager. While the format of Global’s trusses is dissimilar to some used in the U.S. — they utilize a conical end-point connection rather than an end plate — Kahn says resupplying the rental market for complete truss assemblies is part of the company’s strategy to gain market share in the U.S. Another part of that strategy is using lower prices to foster niche markets, such as DJs seeking to move from plastic truss assemblies to aluminum ones, and to market permanent truss installs in venues like churches and retail as well.
Also, Kahn says, lower materials costs allow overseas manufacturing to stay competitive in the custom-made market. “If a customer can’t wait the three weeks or so it takes to ship a custom truss by container, the cost of air-freighting it is offset to some extent by lower products prices made possible by lower materials and manufacturing costs,” he says.
What truss makers and other companies whose products depend upon raw and finished metals can expect is more price volatility, with the larger industry leaders providing some early indicators. One of the world’s largest aluminum makers, U.S.-based Alcoa, reported a 35-percent decline in Q4 2008 aluminum prices, dropping Alcoa’s alumina revenues by 21 percent and leading to its first quarterly loss in six years. To compensate, Alcoa announced it would cut output and costs dramatically, including 15,000 worker layoffs.
Copper has been experiencing the same sort of roller coaster ride, with the COMEX (raw copper) price dropping 58.8 percent just in the last six months of 2008. Bill Anderson, marketing director at TMB in Southern California, which supplies professional lighting and staging equipment from its locations in Los Angeles, London, New York, Toronto and Beijing, says he noticed a slight rise in the pricing of copper, which they use mainly in the form of cabling, in January. But no clear trend had emerged by the start of the year. All that was certain is that volatile price swings create the thing that businesses fear most: uncertainty, and the inability to reliably forecast strategically. “People might initially think that dropping prices are a good thing,” Anderson says. “But the reality is, when prices change this fast in either direction, it removes your ability to plan inventories. That’s the real issue for all of this.”
