As a manufacturer, I see buyers like you struggle. Steel prices jump, and suddenly your budget is broken. It’s frustrating when you can't get a stable price for essential parts.
The long-term impact of high raw material costs is significant. It leads to sustained price increases for undercarriage parts, making financial forecasting difficult. If suppliers cannot pass these costs on, their profit margins shrink. This can also create a competitive disadvantage against those with lower costs.
This isn't just a temporary problem. It affects your entire supply chain. You are likely wondering how long this will last and what you can do about it. Let's break down what I'm seeing from the manufacturing side.
Should I expect continued price volatility in the coming years?
You need to set your budgets for next year, but how can you? Prices for steel and alloys change every quarter. I know this makes your job incredibly difficult.
Yes, you should expect continued price volatility. Global supply chain issues, geopolitical tensions, and shifting demand for industrial metals mean the market will likely remain unstable. This uncertainty in raw materials makes stable part pricing very difficult for manufacturers to guarantee long-term.
I talk to purchasing managers like David Miller every day, and their biggest headache is uncertainty. When they get a quote, they need it to be valid for more than just a week. But from my side, the steel mill might change my price before I even finalize your order.
You mentioned that "supplier quotes are unstable" and this "affects long-term cooperation stability." This is the core problem.
What Is Driving This Instability?
It's not just one thing; it's a combination of factors that create a perfect storm for pricing.
1. Global Supply Chain Disruption: Since 2020, supply chains are still healing. Shipping container costs 1, port delays, and high energy prices (especially for running a foundry) all add to the final cost.
2. Geopolitical Factors: Conflicts and trade tariffs can instantly shut off access to key raw materials 2. This includes nickel, chrome, or high-grade iron ore. When a major source disappears, everyone scrambles for the remaining supply. This makes prices skyrocket.
3. "Green" Energy Initiatives: The global push for lower emissions is good, but it has a cost. Steel production is very energy-intensive. Shifting to 'green steel' 3 requires massive investment. It often uses more expensive energy sources. This cost gets passed down to me, and then to you.
How This Affects My Production (And Your Price)
When my raw material costs are a moving target, I have two bad choices:
- I can raise prices across the board to create a "buffer" for myself.
- I can keep prices lower but have to re-quote you often, which I know you hate.
I find that most of my long-term partners prefer honesty. They want to understand why the price is changing.
Here is a simple breakdown of how a small material change impacts the final part.
Table 1: Example Cost Impact on a Track Roller
| Cost Component | Percentage of Cost (Stable Market) | Percentage of Cost (Volatile Market) | Impact on Buyer |
|---|---|---|---|
| Raw Steel & Alloys | 40% | 55% | The largest and most unpredictable cost driver. |
| Energy (Heat Treatment) | 15% | 20% | Energy prices often rise with material costs. |
| Labor & Manufacturing | 25% | 15% | Becomes a smaller piece of the total cost. |
| Logistics & Other | 20% | 10% | Also volatile, but less than raw materials. |
As you can see, when steel jumps from 40% to 55% of my total cost, I cannot absorb that. No manufacturer can. This volatility directly impacts your ability to set your own prices for your customers. You can't create a yearly catalog with stable pricing if your own costs are changing monthly. This is the core problem we must solve together.
How can I work with my supplier to mitigate the impact of these price fluctuations?
You might feel stuck just accepting price increases. But a good supplier shouldn't just send you a new, higher price list. I believe we should work as partners.
You can mitigate the impact by shifting from short-term orders to strategic partnerships. This includes exploring long-term contracts to lock in pricing, providing clear purchasing forecasts, and practicing strategic inventory management. Open communication with your supplier is the most critical tool.
This is where I find the biggest difference between a simple "supplier" and a true "partner." A supplier just sells you a part. A partner helps you manage your business.
I had a customer in the US, very similar to David, who was getting killed by volatility. He was buying small batches every two months. Every single order had a different price. He couldn't plan his cash flow, and his customers were getting angry.
From Transactional to Strategic
We sat down and changed the entire way we do business. Here are the strategies we used, and you can use them too:
- Blanket Orders: Instead of 6 small orders a year, he gave me one 'blanket' purchase order 4 for the whole year. This PO had a schedule of when he needed the parts.
- Forecasting: Because I had his 12-month forecast, I could buy my raw materials in bulk when prices were lower. I didn't have to buy steel on the 'spot market,' 5 which is always the most expensive.
- Shared Risk: We agreed on a price based on that bulk material buy. It was locked in for 6 months. He got stability. I got a predictable order. We both won.
Managing Your Inventory (The "Stockpiling" Problem)
I know your concern. You mentioned that in response to price hikes, you "might have to stock up in advance." But you correctly pointed out that this "ties up a lot of working capital" and you "risk the parts becoming obsolete." This is 100% correct.
But "strategic inventory" is different from "hoarding."
- Hoarding: Buying everything you can because you fear a price hike. This is risky.
- Strategic Inventory: Analyzing your data to find your "A-parts" (the 80/20 rule 6). These are the parts you always sell, like common track chains or rollers for popular excavator models.
You should work with me, your supplier, to build a small, strategic stock of these A-parts. At Dingtai, we can sometimes hold this stock for you at our facility and ship it as you need it. This gives you a price lock without tying up all your cash and warehouse space.
Table 2: Comparing Purchasing Strategies
| Strategy | How It Works | Pros | Cons |
|---|---|---|---|
| Spot Buying | Order parts as needed, month-to-month. | Maximum flexibility. | Highest price volatility. Risk of stock-outs. |
| Stockpiling | Buy large amounts when price seems low. | Can save money if timed right. | Ties up cash. High storage costs. Risk of obsolescence. |
| Blanket Orders | 12-month PO with scheduled releases. | Price stability. Better supplier planning. | Requires good forecasting. Less flexible. |
| Strategic Sourcing | Partner with supplier, share forecasts, hold key inventory. | Best balance. Price stability, secured supply. | Requires high trust and communication. |
I strongly believe strategic sourcing is the only way to win in a volatile market. It changes the conversation from "How much does this cost today?" to "How do we protect our businesses for the next year?" This is how you avoid the pain point of "passively accepting price increases" because you feel you have "no bargaining power."
Are suppliers looking for alternative materials to reduce their dependency on steel?
It’s a logical question. If steel is so expensive and volatile, why don't we just stop using it? I get asked this all the time, especially by buyers looking for a magic solution.
Yes, suppliers are constantly researching alternative materials and innovations to reduce costs. This includes developing new alloys, composite materials, and improving recycling. However, for high-wear parts like undercarriage, steel's strength and durability are extremely difficult and expensive to replace.
This is a subject I am very passionate about. At Dingtai, our 20+ engineers are always testing new things. But the reality is, an excavator's undercarriage lives in hell.
Think about what a track roller or track chain does. It operates in abrasive sand, high-impact rock, and wet mud. All of this happens while supporting a 50-ton machine.
The Problem with "Alternatives"
You mentioned your concern about "suppliers pushing parts with alternative materials." You said you "have to spend time testing them" and worry, "What if it has a poor fit and fails?"
Your worry is completely justified. This is a major pain point for technical buyers.
- Composites/Plastics: These are great for lighter applications, like in a car. But they simply shatter under the impact and abrasion that undercarriage parts face.
- Aluminum Alloys: Much lighter, but they wear out fast. The cost of replacing an aluminum part 3 or 4 times is much higher than using one steel part.
- Ceramics: Very hard, but very brittle. They crack under impact.
This is why, for now, steel (specifically, boron steel alloys 7) remains the king. Its unique combination of hardness (from heat treatment) and toughness (ability to resist impact) is unmatched.
Table 3: Material Comparison for Undercarriage
| Material | Strength / Impact | Wear Resistance | Cost | Verdict |
|---|---|---|---|---|
| Boron Steel Alloy | Excellent | Excellent | Medium-High | Industry Standard. Best all-around performance. |
| Standard Carbon Steel | Good | Poor | Medium | Fails heat treatment. Wears out too quickly. |
| Aluminum Alloy | Poor | Poor | High | Not suitable for high-load, high-abrasion. |
| Composite (e.g., Carbon Fiber) | Good (Specific) | Poor | Very High | Brittle. Cannot handle abrasive sliding. |
Where Is the Real Innovation?
Since we can't easily replace steel, the innovation is happening in other areas. This is how we fight cost increases.
1. Better Alloys: We are not using the same steel as 20 years ago. We work with steel mills to add micro-alloys (like boron, manganese, and chromium). These make the steel harder and tougher with less material.
2. Smarter Manufacturing: We use precision forging to create parts that are closer to their final shape. This "near-net-shape" forging means I buy less raw steel. I also waste less in the machining process. This helps me control my costs.
3. Advanced Heat Treatment 8: The real magic is in the heat treatment. We can make a part last twice as long, not by changing the material, but by optimizing the hardening and tempering process. This gives you, the buyer, a lower total cost of ownership, even if the initial part price is slightly higher.
Please, be very suspicious of a supplier who offers a "revolutionary" new, cheap material for undercarriage parts. As you said, the cost of testing it and the risk of failure are often not worth the small initial savings.
How does this price uncertainty affect my ability to set my own prices for my customers?
This is the final and most important problem. You are in a business. You have to make a profit. But you are squeezed between my rising costs and your customers who demand stable prices.
Price uncertainty directly squeezes your profit margins. It forces you to either absorb the increased costs or pass them on to your customers. This makes it difficult to maintain stable pricing, which can affect customer relationships and potentially reduce sales demand if your prices are no longer competitive.
You are right, you "can't set stable prices for your downstream customers." And you worry that if your "procurement costs are higher than larger buyers, your competitive advantage will weaken."
This is the reality of the B2B aftermarket. You are not just selling a part; you are selling reliability.
Stop Selling on Price, Start Selling on Value
When your costs go up, you have two choices:
1. Find a cheaper supplier.
2. Explain the value to your customer.
I have seen many distributors (my customers) fail because they choose option 1. They find a cheaper supplier, but that supplier is cutting corners. They are using inferior materials 9 or bad heat treatment.
You mentioned this pain point yourself: "If raw material prices rise too much, some suppliers may use low-cost materials to reduce costs... the parts wear out faster and actually cost more in the long run."
This is the exact story you need to tell your customers.
Change the Conversation with Your Customer
When your customer complains about your price increase, you must be prepared to explain why.
You (to your customer): "I know this track roller is 10% more expensive than last year. Let me tell you why. The price of high-grade boron steel has increased 25%. I had two options: I could buy a cheaper part made from lower-grade steel, which will fail on you in 800 hours. Or, I can stick with my partner, Dingtai, who guarantees the material and heat treatment, giving you 1,500 hours of life. My price is 10% higher, but this part lasts almost twice as long. Which one actually saves you money?"
This is how you move the conversation from Price to Total Cost of Ownership (TCO) 10.
When you have a supplier like me (Dingtai), you are not just buying a part. You are buying the data, the quality control (ISO9001, 100% inspection), and the technical support to prove this value to your customer. This is how you protect your margin. You justify your price with quality and reliability.
This is how you regain your competitive advantage. The big buyer might be cheaper, but are they getting the same quality? Are they getting the technical support? Often, they are not. You can be the technical expert for your customers, not just a box-shifter.
Conclusion
Raw material costs will stay volatile. The best long-term strategy is not to find a cheaper part, but to build a transparent, strategic partnership with a quality-focused manufacturer.
Footnotes
1. Data on current global freight rates and port delays. ↩︎
2. Information on critical materials like nickel and chrome for steel alloys. ↩︎
3. Learn about the methods and costs of low-emission steel production. ↩︎
4. A guide to using blanket orders for procurement stability. ↩︎
5. Definition of the commodity spot market vs. long-term contracts. ↩︎
6. How the Pareto principle applies to inventory management (A-parts). ↩︎
7. Technical specifications for boron steel used in heavy machinery. ↩︎
8. Explanation of hardening and tempering processes for steel durability. ↩︎
9. Risks and identification of