Photo courtesy of True Focus Fabrication
Addressing the challenges of those who rely on ordering metals and how to source these materials without breaking the bank account.
Metals are the foundational material critical to any constructional marvel in the modern era. Of course that includes race cars.
Times have certainly changed. Manmade alloys are created for specific use cases, and the mills that mine and refine ore work in tandem with manufacturers to supply distributors finished goods to be purchased by end users around the world. From mills to manufacturers, distributors, suppliers, and end users, each step of the process is important to the racing industry. Navigating relationships along the supply chain can be difficult yet paramount, as it's a constant balancing act: Price to quality, arrival time to distance, supply and demand. These factors dictate how manufacturers, distributors, suppliers, and fabricators source their materials and conduct business.
While this explanation of the metal supply process is ostensibly simplified from the actuality of conducting global business, it reflects how intricate supply chain operations are and how companies in this industry operate within it.
The metal supply industry has faced challenges this past year. Businesses had to brace for operational and price structure changes when tariffs on foreign-sourced aluminum and steels were implemented.
The effects of this policy change put businesses dealing in the metals industry on high alert, as seemingly each day brought novel changes in tariff percentages levied against incoming goods from particular countries—countries that happen to be the first and second largest producers of crude steel.
Unfortunately, these policies posed but one example of how forces outside of an industry's control can incite massive operational changes felt by all rungs of stakeholders across the manufacturing ladder.
When challenging times have the potential to shift entire industries, those behind the curtain work tirelessly to ensure the consumer or end users don't feel the same pressures inflicted on the company—if possible.
Rising and Crashing Tides
Companies essential to motorsports still manage to source the best deals for metals, even when extenuating circumstances get in the way. But how?
"The people shopping for these materials, probably more than anything, boils down to forecasting. Knowing their needs and their customer needs, that's going to be the most important thing," explained Dwayne Young of AED Metal Products, Indianapolis, Indiana.
AED Metal Products' slogan is "The World's Fastest Metals Distributor." The company offers some aspects of manufacturing, and imports metals from countries including Germany, Finland, and Sweden, according to AED owner Al Lowe. The company also specializes in first-stage metal processing for end users and/or metal distributors.
"These are pretty favorable countries" said Lowe, citing a general disposition that, "we've [America's] got good relationships with these countries. There is some integrity in relationships that you have to build with your distributor, your vendor, whether that's AED or any other metals houses that are out there."
He continued, "The better the relationship, the more likely they are to get some exception on product that does not come from overseas, or product that they arbitrarily raise the price on because they can."
AED, and many others in the industry, felt the rising and crashing tides of the tariffs earlier in the year. The challenges resulted in examples like, "two shipping containers on the water were expected to be here," began Lowe. "Both of which entered the [US] waters, but they never got to the port. That was about an $18,000 cost when we had to pay the tariffs unexpectedly on those two containers worth of material."
Lowe expressed how turbulent outside factors can be. The sudden accrual of $18,000 in tariff fees had abruptly risen while AED's material shipments were in transit to the port. This unforeseeable expense, for many supply chain operations, can be detrimental or even business ending.
When the tides move in unpredictable patterns, Lowe and Young both recommend maintaining strong relations and clear communication with distributors or suppliers.
"Historically, [we] have never declined on an open purchase order from a mill. We've never canceled an order. I think that develops long-term relationships," said Lowe.
While this approach may seem costly, having an excess of material is not always a bad position to be in. On the contrary, accepting all orders seemingly benefits AED.
A one-off metal order for a custom chassis can throw off a fabricator's purchasing plan. Yet fabricators who have long-term relationships with their distributors can often negotiate the price of a one-off specialty order to mitigate additional costs. Photo courtesy of Warrior Race Cars.
"I think it gives us some freedom to make special requests and have it accepted," explained Lowe.
One-off orders are a common occurrence in motorsports. Often, a bespoke chassis could need special attention during the fabricating process. Just as Lowe and Young leverage their mill relationships, fabricators can wield the benefits of a long-term relationship with their distributor when placing a sudden one-off specialty order.
However, operating in this fashion can equally have drawbacks. In the case of economic abnormalities directly inflating the cost of material, manufacturers and distributors can quickly end up in a bind. Customers of AED were hesitant to make additional purchases, according to Lowe, predicated on the fluid nature (at the time) of fluctuating prices on alloys, metals, and steel.
Lowe provided tungsten as an example of an often-used material in motorsports. This dense metal is considered to be a "powdered metal," typically used in motorsports for its dense properties as a "ballast [or] weight balance on a car," he explained.
To help weather the price fluctuations seen recently in metals, one industry source advised planning as far in advance as possible or maintaining a little bit more inventory than normal to avoid any complications or delays that may arise.
"Most of the raw material comes out of China. That's where the tungsten powder is mined. I had one of our vendors break it down the other day. Between the tariffs that the previous Biden administration put in place when it started, and the 125% [at the time] that the new Trump administration put on it, we're looking at a 173% tariff on tungsten products."
The reality of indirect pressures, like a sudden 173% increase in import tariffs, put companies on guard. "We can't absorb that cost," said Lowe. "We have to pass that increase along, or we should. The sooner we think about what that increase is going to do, the better we can help prepare our customers for that sticker shock."
Helping customers is best practice in most instances; however, with the sheer volumes that manufacturers and distributors handle, the ability to assist all customers becomes increasingly more difficult. Aware of the increased prices, shoppers and patrons of metal distributors tended to operate with increased apprehension.
"'Should I buy now? Should I wait? I don't really need it now. Maybe I'll have the money. But I'll find it if I need to buy right now.' Those are the kind of conversations we're having," said Young. "You can't force customers to buy what they don't need."
Providing customers with proper timeline expectations, availability, and pricing as passed through costs can assist in bracing for unforeseen outcomes.
Customer Rewards
In these challenging times, metals distributors are working tirelessly to ensure that their customers don't feel the same pressures inflicted on the company--when they can. Photo courtesy of Stainless Diesel.
Steve Hinely of Robert & Sons in Newnan, Georgia, shared a similar outlook with his company's approach to conducting business during fluid times in the industry.
"Our job is to make it easy on the customer," he said.
"We're having to forecast and plan about three months in advance, typically. If there's an issue or you get a big order, and there's a problem with material, you can't just suddenly fix it. We try to overcompensate for that…but at times, there's no way to plan for that kind of thing. But we're not scared to have [that material] in stock.
"We try to do everything we can to where the customer is not affected by all the issues that we might be experiencing with our suppliers," stated Hinely.
He advised both suppliers and shoppers "to plan as far in advance as you can or just try to maintain a little bit more inventory than you typically do, just in case there's an issue."
Hinely attributes the overstock strategy as a form of recourse. Regardless of what pricing may occur at the time of Robert & Sons' acquisition, when the company has a surplus of stock, it allows their pricing to react to how the market fluctuates in real time. Especially if the requested product is already in stock.
This open-ended approach optimizes prices in both directions. "We don't lock in a price for a long period of time. When we buy, it kind of flows with what the market is doing," he added.
"When the price goes down, our cost will go down, and we can pass it along. Or if it goes up, we can react to that. The way we buy the material gives us the most flexibility in the way we price it."
While prices of metal materials inherently fluctuate, when a manufacturer, distributor, or end user purchases "quarterly, or six months [of material]," in Hinely's experience, he suggested that shops are then "stuck at whatever you agreed to at the time."
Hinely's sentiment draws on the indirect correlation between time and cost of material. "It can work in your favor, or it might not. So, we don't gamble." He further pointed out the nature of how quickly pricing in the market may change. "One tweet could change the aluminum price."
Quantity is a factor that will get a fabricator the best metals pricing. One article source reminded, "As with anything, more volume, better price."
Recognizing the bind that end-user shops may experience, Robert & Sons exemplifies how manufacturers and distributors can provide solutions to their patrons: offering a rewards program to help its customers with their orders.
Hinely explained that the rewards program is increasing customer loyalty with long-term relationships, while simultaneously helping the customer receive great products and service. Furthermore, Hinely expressed the synergetic relationship that has grown since the dawn of the Robert & Sons rewards program.
"At times we're absorbing the increases," he admitted. "Other times we're making a little bit more, which offsets the time that we're absorbing it.
"We've been in business a long time, and we arranged long-term relationships with customers, not just, 'Hey, we'll give this guy a cheap price and get him buying from us, and then we're going to raise his price up.' We're not into that kind of thing. By doing so, if customers need a favor or need something different, that's kind of up our alley."
More Volume, Better Price
Adam Richardson at Stock Car Steel and Aluminum in Mooresville, North Carolina, attributed quantity as a factor that will assist with the best pricing. "As with anything, more volume, better price."
Richardson suggested in uncertain times in the market, "with tariffs and the price being inflated," as the example, "order only what the customer is comfortable with." In many cases, this can create a more manageable inventory, and depending on the circumstances, could be a better option for managing expenses and cash flow.
The metals industry is the foundation of many motorsports, and sourcing the materials for these programs goes beyond the scope of manufacturers, distributors, and the builders that rely on these materials. From a monetary position, the changes that occur in the metal sourcing industry are often outside the grasp of control.
Supply chain is an intricate web, necessary to conduct and maintain business. When economic events strike, the impact is felt throughout the industry. Companies are not alone in tough times. Forecasting and loyalty are the assurances that keep companies tenacious and performing time and time again for their patrons.
Lowe remains steadfast in challenging times and pushes forward toward new opportunities. "You know, we want to build a new building and get relocated. We just focus on who we are, what we do, and we're very blessed to do the trade we do here in the United States and around the world. We have a good program, and good products."
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SOURCES
AED Metal Products
aedmetals.com
CageKits
cagekits.org
Robert & Sons Aluminum
rsaluminum.com
Stock Car Steel and Aluminum
stockcarsteel.com
True Focus Fabrication
truefocusfab.com
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