Materials prices are skyrocketing, causing pricing disruptions for everyone in the industry. Aluminum is modestly affected, often with only single-digit percentage increases. At the other extreme, one manufacturer reported that their cost of some wood products has tripled.
But steel is the biggest problem, and it’s universal. “All the axles are steel,” said Doug Mclam at aluminum specialist P.A.S. (High Country trailers). “The wheels, the couplers, the pins.”
The steel price upheaval is driven by several factors including relentless Chinese consumption (Business Week recently reported that China now accounts for 27% of the world market), reintroduction of tariffs on imported steel, the softening of the U.S. dollar against other currencies, and other issues.
“I think steel prices are close to peaking,” commented Dutton-Lainson V.P. Mark Bliss. “But I don’t think they’ve peaked yet.” He goes on to predict that his company’s surcharges will turn into a permanent price increase because steel prices “won’t go down a lot.”
Trailer manufacturers are reacting to these materials cost increases in different ways. Most of the steel-framed trailer builders are adding surcharges on a rolling basis. But some manufacturers, typically aluminum trailer specialists, are simply raising prices to avoid surcharges because they make it more difficult for the dealers to know in advance what the final price will be. Some companies are doing some of both. And a few companies have been eating the price increases so far, but are resigned to increasing prices soon if they haven’t already started to do so.
End user impact is the real concern to everyone. “It’s going to come down to the retail end, and my concern is that the trailers might get priced out of affordability,” said Rochelle Priesgen, president of Triton Corporation. And she’s not alone on that. “We don’t want to price ourselves out of the market,” reiterated Ron Zygarlicke of H & S Loadmaster.
“Steel prices are going to drive more people into aluminum,” predicted Bob Bainer, owner of Four Winds Recreational Products. Interestingly, more than one steel trailer manufacturer who has added aluminum product in the recent past reported that they have dropped their aluminum lines. So if Bob’s prediction is correct, the beneficiaries of an increased move to aluminum would be the non-ferrous metal specialists.
The bottom line is simply this. “Costs are continuing to go up,” says Dexter Axle’s Leroy Crain. “Everybody’s raising prices to everybody else.” Still, most of the manufacturers we interviewed are cautiously optimistic about the rest of this year and into the future. psb