Customers Declining, Input Costs Rising

Our input costs are rising. Gas prices are hovering around the $3 level again and metal prices have been rising albeit slowly. Then today I read the AK Steel (AKS) quarterly earnings report and find that they are warning against inflation in the manufacturing sector due to a rise in iron ore prices. Hence, prices will continue to rise throughout the year.

From MarketWatch

AK Steel said it assumes global iron ore prices to rise 30% over the January to March period. If prices go beyond that, the company said it would hurt its financial performance for the second quarter.

At the start of the year, iron ore suppliers Vale SA and BHP Billiton changed the way they structure iron ore contracts, setting prices on a short-term rather than annual basis.

This week, Credit Suisse analysts upped their average 2010 price target on iron ore by 56% to $129 per ton. Prices for raw materials are rising as the world economy slowly recovers and consumer spending on cars and appliances picks up.

The main problem with our business lately has been customers. People are hoarding their money in this area and unless the summer temperatures are sweltering, I don't feel like business will pickup significantly. The rise in input costs is just another punch to the gut. You can only cut so many costs and find ways to save money until everyday fixed costs (Rent, phones, gas, metal etc.) begin to weigh on any profits. Profits by the way that will solely contribute to a debt that was incurred during the hardest times over the last two years.

I'm crossing my fingers for an air conditioning boom summer. Something that we didn't have last year.