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President's Corner

"Upward Metals Pricing as a Positive Indicator"

It's been a long time since I was encouraged by increases in aluminum metals pricing. Typically it's a sign of inflationary pressures or simply the natural result of markets working efficiently and effectively. Not so long ago, we saw the "perfect storm" of excess demand driven by commercial aerospace, semiconductor and automotive coupled with alumina shortages, dislocation of affordable energy and a shortage of aluminum scrap. All these factors combined to push prices to peak levels by 2008 while creating aluminum shortages and allocation conditions with the producing mills. A weakening dollar sure didn't help any.

But probably like you, I didn't smile as prices continued to rise.

Pricing peaked in 2008, and as we all know, demand fell off a cliff shortly thereafter. By early 2009, lead times were short, supply was not an issue and pricing fell through the floor. With a worldwide glut of aluminum scrap, prices for scrap dropped near 50%. (I should note that aluminum was anything but alone in these markets swings. By late 2008, steel borings were worthless.)

But now we are seeing some signs of life in metals, broadly speaking. A recent increase in aluminum pricing from domestic mills has seemed to stick. I figure that they (and especially the markets) know more than I do, so I pay close attention. Scrap prices, too, have rebounded from their lows in 2009. Instead of being off peak numbers by 50%, prices for aluminum scrap are "only" off 30%. I'm encouraged by these leading indicators that we may have seen the bottom.

Counter-intuitive as it may be, if higher prices for metals mean we're on our way out of this manufacturing recession, I'll gladly embrace them.

From all of us at TCI, our best wishes to you for a healthy and profitable 2010!

-John Belzer

P.S. In our first issue back in September, I promised blogs that would be short and to the point. I intend to make good on that promise. But I'll be talking more later on about metals pricing and its broader implications for our businesses. There's so much more to say!

This Month's Featured Process - Precision Plate Sawing

TCI Precision Metals has six precision plate saws to cut our plate and sheet to tight tolerances. Our saws are capable of cutting all allows of aluminum including 6061, 2024, 7075, 5052, 3003 and cast plate just to name a few. We routinely cut large plate with thicknesses up to 8".