Rapidly increasing costs of steel and other raw materials could pose a bigger threat to auto suppliers this year than previously expected, a Deutsche Bank analyst said.
In a note to investors issued late Tuesday, Rod Lache said steel prices are up 10 percent to 120 percent so far this year, depending on the variety. At the same time, prices of aluminum, copper and magnesium also have posted double-digit increases, he said.
Meanwhile, rising crude oil prices have resulted in a 15 percent to 20 percent jump in the cost of plastic resins, which are used in automotive interiors, he said.
Lache said he was surprised that higher raw material costs didn't have that big of an effect on the first-quarter results of auto suppliers, but noted that the steep increases didn't begin till toward the end of the period.
"We believe headwinds will continue to be mild in the second quarter of 2008," Lache said. "But, assuming current prices hold, they will become incrementally more severe in the second half of 2008 and in the first half of 2009."
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