Friday, April 23, 2010
By Miho Inada of the Wall Street Journal
Surging Prices, Fueled by Emerging-Market Demand, Hit Profits and Consumers
An unrelenting rise in the cost of raw materials—largely driven by mounting demand from Asia—is cutting corporate profits, hitting stocks and, in some cases, pushing up consumer prices.
One glaring example is the sky-rocketing cost of rubber, a major tire component, which has climbed nearly 74% this year after rising 92% in 2009. Industry analysts and some tire makers, including Goodyear Tire and Rubber Co., in Akron, Ohio, and Bridgestone Corp., in Tokyo, have warned investors about a potential hit to profits.
Rubber prices have risen 74% this year, and lumber is up 59%. Above, tires for recycling in Toyama, Japan, and, below, lumber in Huaibei, Anhui, China
A similar concern faces firms that buy other rapidly rising raw materials. Palladium, which goes into car exhaust systems, is up nearly 39% this year, potentially boosting costs for U.S. car makers as they seek to emerge from their slump.
Lumber, a major cost for home builders, is up nearly 59%. Analysts at Raymond James lowered their ratings on three home builders last week, in part citing "surging lumber costs."
Iron-ore prices also are rising, while oil and copper prices have tacked on to last year's huge gains.
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Related Commodities:
[Softwood, 2"x4", Spruce/Pine/Fir] [Cold Rolled Steel Sheet] [Hot Rolled Steel Sheet] [Palladium] [Natural Rubber Tokyo] [Natural Rubber Malaysia] [Synthetic Rubber Index]