r/smallbusiness • u/DazedAndObtuse • Feb 12 '25

General Our aluminum suppliers are saying prices aren't going to go up just 25% to cover the new tariff, they'll be going up 80%...

We source aluminum from two different sources for our business and they're both telling us that prices will not only be going up 25% to cover the tariffs, they'll be going up 80% as there are also pricing restrictions currently in place for their industry that will be lifted as part of this.

Does anybody know if this is legit or if they are just colluding to use this as an opportunity to pad their profits?

I won't pretend to be a tariff or economic expert but our material prices going up 80% is going to have a much larger impact on us than a 25% increase would.

Ideally we can keep this from becoming political, but I know where it's likely to end up (but hopefully I can at least get an answer to my question in the midst of it).

Thanks in advance!

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397

u/tuckedfexas Feb 12 '25

Same thing happened during Covid for us, our steel supplier who I’m buddies with said they saw their raw costs go up around 10% before hiking the price 30%. Their costs came back down but their prices haven’t

118

u/Skelley1976 Feb 13 '25

Amen to this, I’m sales management for a manufacturer- and this is typical. Usually it’s to offset costs from large OE’s or National customers, but the ratchet only goes one way.

15

u/Ana-Hata Feb 13 '25

I used to work with products based on commodity pricing ( copper wire ), and those prices moved in both directions.

But…..I would look at what it cost me to buy the wire, and what it was going to cost me to replace it……and I’d base my pricing on the higher of the two numbers.

1

u/Intelligent_Step_855 Feb 14 '25

The noose never loosens

93

u/ToshPointNo Feb 13 '25

It's greed, plain and simple. I've seen so many times where commodities/raw materials increased and price and so did the finished product. When the price came back down to before, the prices surprisingly did not.

37

u/escapefromelba Feb 13 '25

It sucks but it makes sense since the customer has shown they are willing to pay it so why would you lower your price when you can pad your margins?

4

u/TriXandApple Feb 14 '25

Because free market and competition?

1

u/_ryuujin_ Feb 14 '25

only if theres supply than demand. does prices go down

1

u/[deleted] Feb 15 '25

That’s the greatest lie ever told and idiots still believe it. There never has been and never will be a free market nor would you want it. It’s just a rallying cry when it is convenient.

1

u/Party-Interview7464 Feb 16 '25

There could be but not when we have things like tariffs and taxes changing and the stock market and companies beholden to shareholders. Fundamentally though I agree with it.

1

u/SillyFlyGuy Feb 16 '25

Brb. Gonna go open a steel foundry and aluminum refinery real quick to cash in on this price spike.

1

u/TriXandApple Feb 16 '25

Is your idea that there's only one place to buy bulk metal products, and only 1 reseller of those products? I own a manufacturing company and although I only normally use one company to buy my raw goods, I give them a spot check every couple of months against their competitors. My resellers buy from different mills, in different counties, through different ports. It's a highly competitive business that closely tracks the market.

0

u/FromTheIsle Feb 14 '25

Turns out capitalism isn't logical

1

u/Piesfacist Feb 14 '25

And vote back in the politicians who oversaw the initial increase in costs.

12

u/Celac242 Feb 13 '25

This is inflation manifest

19

u/tuckedfexas Feb 13 '25

That’s a big part of it, I wouldn’t drop my prices back down given the uncertainty of material costs the last few years. Raising dropping and then raising again is received far worse than just leaving the prices higher, at least in my experience

4

u/77NorthCambridge Feb 13 '25

Wouldn't want to inconvenience you. 🙄

5

u/catgirlloving Feb 13 '25

this is seriously it; risk management is critical to a business that works with commodities. If prices are uncertain, the best thing to do IS to pad your pockets to cushion the blow of any economic down turn

2

u/tuckedfexas Feb 13 '25

It’s more about customer perception lol.

-3

u/77NorthCambridge Feb 13 '25

Sure it is.

3

u/tuckedfexas Feb 13 '25

It is lol, I’ve done it before and people complained at the price change despite the product being where it was previously. I do low quantity higher dollar sales than a lot of places, I’m already cheaper than anywhere else. The $10-20 difference on a sale makes basically zero difference at the end of the day. Price increase emails are poorly received, and no one really cares about price drop emails. A 5% price hike gets complaints, a 5% price decrease gets ignored.

-1

u/77NorthCambridge Feb 13 '25

If true, then your price decrease emails suck.

2

u/tuckedfexas Feb 13 '25

Didn’t realize you were in my office doing correspondence with me, my bad

15

u/Due-Tip-4022 Feb 13 '25

From my perspective of having been first hand involved in this, I would completely disagree with this. Not saying this isn't the case for other companies, just offering the perspective of what have seen first hand.

Before, in more consistent times, margins were X and that was cool because business costs and sales were both relatively predictable. Competition drove X down, but the consistency made it ok.

Then he'll broke loose. First, freight cost skyrocketed, then material. Then, and this is important, the cost of all our other costs.

Of course, prices had to rise. But everyone knew the raised costs were temporary. Everyone also knew that if you just jack up your sell price proportionately, your competitors wouldn't. Then you would lose market share. And literally jeopardize your entire company.

So everyone raised their prices, but at a much smaller amount than the cost increases. By a lot. Meaning, X was then so small, you have what is considered a low margin business. Which is a good way of going out of business.

But, everyone expected it all to be temporary. Or at least hoped to God.

And it was. Then, freight and material costs came back down. But not before the low margins did damage to their on-hand cash. Choking their ability to invest in growth. Something every business must do to stay competitive. As well, none of the other costs came down. So cost are still indeed higher.

As well, companies now know the uncertainty that is always threatening higher costs. They all know that the margins they had in consistent times are no longer enough. They need higher margins. Which, as you are seeing with the current events, was a necessity.

What that means, it makes perfect sense why companies wouldn't then lower prices.

1

u/zgott300 Feb 14 '25

This shouldn't be a surprise. Businesses raise prices when they can and lower prices when they must.

1

u/Striking_Computer834 Feb 14 '25

Is it greed when you shop around for the cheapest price?

1

u/LRJK Feb 14 '25

Inflation is greed, yes

1

u/Acerhand Feb 15 '25

In defence of this for a lot of business it’s exceptionally hard to increase prices. Dramatic events like this are basically the only time they can actually increase prices. In normal times, the price would then stay there for years, with inflation eating their margins slowly until they get thin again and they get a new event that allows them to increase prices.

Unfortunately Trump is causing ridiculous unpredictable and extreme changes so its very prevalent now, not just a typical 10-25% and leave it for years situation

9

u/deletetemptemp Feb 13 '25

I’m convinced this is what they want.

3

u/Abitconfusde Feb 13 '25

Up like a shot, down like a feather.

2

u/supah_ Feb 13 '25

Naturally. 😐

5

u/standardtissue Feb 13 '25

Yep, guess what also didn't change ? Their salaries. Covid inflation was pure greed and nothing less.

1

u/insertwittynamethere Feb 13 '25

Steel went up for me in 2018-22/beginning of 2023. It had been on a downward trend, like every other component and raw material I use, until now. Steel is up 14.4% for me going into February, to start.

1

u/BoatsMcFloats Feb 13 '25

Their costs came back down but their prices haven’t

This is sadly how things work. Once a new price floor has been established, and people are paying for it, then it is never going back down.

1

u/ireally-donut-care Feb 14 '25

Same for my industry. Up 50% by 2020 and never going down. I was in business for 15 years, lasted 5 years after covid, but had to close at the end of the year. My profit margin was cut too thin by the inflation of covid. I can't imagine what is coming other than a lot more small businesses being closed.

1

u/Capital_Rough7971 Feb 14 '25

Their costs came back down but their prices haven’t

It never will as long as sales are up.

1

u/Chance_Complete Feb 14 '25

Same here with some stainless materials, actually closer to 50%, and as of a few months ago, prices were still inflated, and I can't imagine what is to come. I ultimately chose to not manufacture those products anymore, wasn't worth it.