August Newsletter
VOLUME 27 NO. 8
Over the last 3 years, prices of basic materials have been very volatile. This has resulted in some intriguing anomalies. Three years ago commodity sized type 304 stainless steel sheet and plate was selling for 90 to 95 cents per pound. One year ago scrap dealers were paying Gem Equipment 95 cents per pound for clean type 304 stainless steel scrap. The thickness most often used by this company, 16 to 10 gauge, peaked out at almost $3.00 per pound. Since this peak, the prices of type 304 stainless steel sheet and plate have dropped significantly and are expected to continue downward. The following table shows not only price changes on various components used in manufacturing food processing equipment during the past 35 plus years, but also the price of workers compensation insurance and health insurance over the same period:
1970/71 1975/76 1981 1985 1991 1994 1997 2004 2008
Type 304 ss – 10 gauge sheet .70 .85 1.09 .92 1.30 1.16 1.11 1.51 2.25
¼ inch plate .98 1.07 .80 1.05 .99 1.00 1.30 2.16
Bearing for Gem 1-15/16 Eccentric 26.00 36.80 67.96 90.72 86,10 90.57 123.19 130.29 159.76
1-7/16 Ball Bearing Pillow Block 7.58 11.26 12.75 18.15 24.43 27.00 30.68 38.43 49.64
72-24-16 Type 304 ss Wire Mesh 12.00 12.00 12.00 12.00 12.00 15.00 12.00 15.00 30.00
2-15/16 Roiller Bearing Pillow Block 76.88 150.56 281.56 335.59 468.17 503.94 583.97 773.57 1170.00
5 HP 1760 RPM TEFC Motor 106.11 134.52 168.44 180.85 188.65 227.42 259.00 372.00 540.00
Health Insurance / Mo. / Employee 28.00 83.44 153.08 261.57 362.65 411.69 813.52 1118.81
Ind. Acc. Ins. Per $100 of Payroll 3.50 4.00 7.73 7.55 10.22 4.47 4.64 4.93 5.94
Stainless steel prices listed above are per pound. Bearings and motor prices are OEM price each. Wire mesh is the price per square foot, mesh only, no side chains, skirt blocks or other devices. The 2008 price shown for wire mesh belt is probably very near its peak and may come down as the drop in stainless steel prices travels through the wire mesh supply chain. It is interesting to speculate on the increase in price of bearings through the years. With the exception of basic metal, bearings are the items purchased by Gem Equipment that have undergone the least changes through the years. While there are improvements in seals and maybe improved metallurgy, a bearing purchased in 2008 does not appear much different than one purchased in 1970. High enough volume to pay for more production improvements is probably the reason that the smaller bearings have not had the price increase experienced by the large roller bearing pillow blocks.
Prices shown for health insurance are the total monthly premium for a family of four under a preferred provider organization (PPO) plan. Your writer’s opinion is that PPO plans are somewhat obsolete. A high deductible health insurance plan coupled with a health saving account (HAS) is much better option for younger employees. The high deductible option is $743.61 per month for a family of 4. Gem Equipment pays 2/3 of the premium for the PPO and 100% of the premium for the high deductible plan. Employees can put before tax money into the HSA. An employee paying his share of the medical bills from his HSA is using before tax money. The same medical bill paid out of his pocket uses after tax income.