Finding Stability in Uncertain Times

The past year or so has been marked by an unprecedented rise in commodities of all types, resulting in rising costs for purchased products for the first time in more than a decade.  Checon’s products are certainly no exception.  With silver and copper making up the vast majority of the price of electrical contacts, our customers have been faced with unexpected component costs that often cannot be quickly passed on to their end device prices.  We’ve all heard the reasons; huge demand from China and India for raw materials, a weak US dollar, speculation in oil, and sympathy with other commodities specifically, silver’s historic link to gold.  Political unrest and the recent economic instability often drive the price of gold higher due to uncertainly in other investments.

The result for our customers is a difficult situation that can leave them uncompetitive if they anticipate higher component costs and reflect them in their pricing, or pinched for margin if they don’t and commodities rise further.    From time to time I get a call from a customer asking for my insight as to where the markets are heading.  Usually I tell them that I’m still holding some silver coins I purchased at $14 silver back in 1983.  Now that silver has traded over $20/ounce that story has lost some of it’s impact, but for over 20 years I’ve been in the red, so you need to be careful where you get your advice.

While we can’t help you know where the markets are headed, we’ve worked on some interesting strategies to stabilize the price of our products based on where the markets currently are.  Of course a stable price is not such a good thing when the markets are declining, so any decision along these lines involves some risk.  At least for some of our customers, price stability is more important than achieving the absolute lowest price.

Contact us if you are interested in learning more about what your options are. We would be glad to discuss them with you.   In the mean time if you get a hot tip on where the price of silver is going, give me a call, I’m still trying to decide what to do with those coins!