According to some analysts, 2006 will remain a minefield of high-cost raw materials and commodities. The expected slippage in prices of many raw materials won't bring price tags back down to their recent historical averages. Here are some examples:
Growth in the electronics industry in 2006 will be similar to 2005, but the difference will be that prices will flatten even as a new up-cycle for the industry will begin.Best estimates for the steel market suggest supply will expand by 7% while demand growth will slow to 5% in 2006, resulting in a 10% decline in average prices.
Likewise, stainless steel prices are expected to fall between 10% and 15% sometime in 2006 because of stronger supply as well as reduced nickel and cobalt ore and stainless scrap prices.Buyers can also expect connector prices to drop by about 3%. Tags had fallen about 7-8% in recent years. Price erosion will also weaken for passives, with prices falling about 3-4%. In previous years tags fell about 6-9%, according to suppliers.
Component demand in 2006 will be healthy, although not stellar, driven by computers, third-generation (3G) cell phones and consumer electronics equipment.
Although prices are expected to drop, energy and some key raw materials and commodities have doubled since 2003. According to economists, less damage has been done to the manufacturing economy than was projected initially. This result is mostly because manufacturing companies have continued to improve efficiency and cut costs