It's not just steel...

OK, so only mass-market Chinese bikes are made with bog-standard steel and it's only BMXs and niche road and MTBs that are made with cro-mo, but that doesn't mean the upscale bike market can relax when there's talk of steel shortages. The overheating Chinese economy isn't just gobbling steel, all raw materials are being swallowed with gusto. Rubber, plastics, aluminium, carbon-fibre - even cardboard for bike sheaths - are all in short supply, and prices are surging.
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BikeBiz.com has run numerous stories on raw materials price hikes, manhole cover pinching and rim-maker robberies, but still some industry folk are fixating on steel and how little of it is used on upmarket bicycles.

But aluminium is also in short supply, with prices rising. For now, most suppliers are absorbing the increased costs because raw materials usually only account for about 5-10 percent of the cost of finished goods but with continuous price hikes, consumers are going to have to start meeting the shortfall.

US bicycle industry consultant Jay Townley believes only those companies that increase prices for their finished bicycles or P&A have a hope of surviving:

"China's red-hot economy has led to raw material shortages across the board, because of its increased consumption, and has driven related prices up substantially in all the developed countries.

"There is no short term solution, unless the Chinese put the brakes on their economic growth, and that isn't likely to happen, so the rest of the world is going to have to absorb and accommodate both the raw material price increases and the shortage of some raw material.

"This situation calls for steady hands on the wheel and logical thinking about charting a course for global trade. Unfortunately that isn't going to happen either. Trade disputes and flat out trade wars are looming, and since this is an election year [in the US] you can expect no logic whatsoever, much less any leadership out of the US, I am sad to say.

"This situation will be like a 100 pound weight exerting growing pressure on the chest of the bicycle industry, and the companies that can do it will increase prices, and those that can't, will probably be crushed."

Of course, it's not just the bicycle trade that's impacted by higher steel and aluminium prices, car makers are also hurting.

In February, raw steel prices in the US surged 83 percent on some base grades of metal. Suppliers to the US automotive industry are beginning to hurt, and lash out.

General Motors Corp., of Bedford, Indianapolis, is suing Steel Dynamics Inc. of Fort Wayne because it could no longer supply steel at the price agreed before steel commodity prices soared.

Other auto parts manufacturers have filed similar lawsuits. Similar spats could start taking place around the world in all manufacturing industries. Yet consumers are still not being impacted as much as they could be. It's probable that, in the bike trade at least, manufacturers of components are waiting until big-hitters raise their prices first. So, all eyes on Shimano, then. The Japanese market-leader has never been so closely watched...

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