U.S. Beating China on Price

We’re beating China on the price of Aluminum parts. I found this in Die Casting Industry Links magazine.

In July of 2011, U.S. parts became equivalent in cost to parts delivered from China. This chart is from an excellent article by Bill Downey on the pricing power of the U.S. Aluminum Die Casting Industry.

Still, this doesn’t tell the entire story. Look closely at the trajectory of prices in 2008. It’s clear prices for U.S. parts would have been competitive by April of 2009 at the latest. I put in an arrow for the chart to make it easier to see the trajectory of prices.

Did something happen in late 2008 which might have caused the price of goods out of China to stop going up in price?

Ah yes…China froze the value of the Yuan. The slope of pricing mirrors the slope of the price in the Yuan.

We saw a huge shift to Chinese manufacturing in the 2000’s. This shift has ended. China no longer has a pricing advantage over the United States on Aluminum parts.

We know we lost 5.5 million manufacturing jobs over the 2000’s. Some of those jobs are going to come back to the U.S., so any future growth in the U.S. economy (heh) will probably add manufacturing jobs here instead of in China.

Comments

  1. Good piece. I have a friend involved in a medium-sized manufacturing business making casters for hospital bed wheels. He has said they have stored bringing some of their manufacturing back to the US. An interesting question will be how will the Chinese authorities deal with the loss of pricing advantage and shift the makeup of their economy from export-manufacturing. It could be a tough adjustment given that the central planning will not allow the market to simply react to price signals.

  2. Some of this is the Chinese government has been clamping down on the more inefficient Al producers (i.e. bad growth). But, in other areas like telecom, they are very much low-balling, esp. in Middle east (oil) and developing nations (i.e. good growth).