Steel prices for US manufactures have been volatile over the last couple of years. Mauser Packaging Solutions purchases a significant amount of steel for both our small and large packaging business units making steel expenditures one of our largest spend categories.
Government involvement in the world steel markets has impacted our company. In 2018, steel prices increased more than 16% over the previous year largely due to enforced government tariffs intended to protect US steel mills. As a global user of steel, Mauser Packaging Solutions is forced to pay a significant amount of duties in response to these tariffs.
Government involvement in the market also impacts how we look at our supply chains, specifically; the ratio of steel we procure domestically versus what we import. Typically, it takes three months lead-time to source from domestic steel mills and approximately six months from international mills. When we determine where to purchase steel from and when to purchase, Mauser need to have a good understanding of prices as well as the knowledge to make educated assumptions about what government policy “will be” in the future.
For example, thus-far in 2019, steel prices have dropped to levels some 25% below 2018 prices. Steel prices have not only lost all gains from 2018 but are now rest below 2017 prices. The volatility in the market has been uncharacteristically high and is challenging not only for our business planning but also for our customers. Volatility can introduce demand uncertainty and changes in product mix.
By establishing relationships with elected officials, Mauser Packaging Solutions and our employees become advocates for higher degrees of planning certainty with respect to trade policy. Policy that fosters a competitive landscape for steel prices, as well as the enforcement of policies, enables our company to make good procurement decisions resulting in growth and expand opportunities for our employees.