Starting from 2022, global forged parts prices have been continuously climbing, particularly against the backdrop of soaring energy prices such as steel and coal. The prolonged supply shortage in the forged parts market has caused their prices to skyrocket. For many small and medium-sized manufacturing enterprises, this means that the cost of purchasing forged parts is higher than before, resulting in a sharp increase in production costs.
To illustrate this issue, this article takes an automotive parts manufacturing company as an example that produces engine parts such as camshafts and valve seats. As these parts require high strength and durability, high-strength forging parts such as 42CrMo4V and 34CrNiMo6 alloy steels are needed for production.
Last year, the company’s procurement cost of forged parts accounted for only about 5% of the production cost. However, since the beginning of this year, the price of forged materials has rapidly increased, resulting in an increase in procurement costs of more than 50%. The company had to take a series of cost-reduction measures, such as seeking domestically or internationally sourced substitutes for imported forged parts, or negotiating price reductions with its forging suppliers. However, these efforts seemed insufficient as the tight supply situation did not improve, and the trend in prices continued to rise.
As the cost of purchasing forged parts continues to rise, this automotive parts manufacturer has to take the following measures to alleviate the pressure:
- Increase inventory: The company increases the quantity of purchased forged parts to distribute the higher procurement costs over the short term.
- Improve efficiency: By optimizing the production process and maximizing the use of equipment and labor, reducing worker overtime to save costs.
- Seek domestically or internationally sourced substitutes for imported forged parts: By working with more suppliers, comparing different heat treatment methods, quality differences, and finding suppliers that meet the company’s requirements and are more reasonably priced.
In conclusion, if forged parts prices continue to rise, it will have a profound impact on manufacturing enterprises, such as automotive parts manufacturers. These enterprises may need to adopt more revitalizing and persistent strategies, such as changing product designs, reducing inventory, and increasing supply chain trust levels, to maintain their competitive position in the market.
