Record global demand for commodities has led to sharp increases in the cost base of heavy equipment manufacturers.

Restricted supply and burgeoning demand for steel, especially in China, has led to the cost of iron ore rising by more than 70 percent on the worldwide markets. This has resulted in a sharp increase in the price of steel and, consequently, in the production costs of manufacturers of construction equipment. Therefore, manufacturers are turning to price increases to offset some of the impact. For example, Volvo Construction Equipment will raise the price of its machines and components by 5 percent globally.

“Manufacturers of heavy construction equipment are being particularly hard hit by the current record prices of commodities, such as steel, oil, iron ore and rubber,” said Scott Hall, executive vice president of Volvo Construction Equipment. “With no sign of commodity prices cooling in the foreseeable future, it has become unavoidable that these costs be offset in the form of a price increase.”

The industry, as a whole, is facing increased costs, and it will be important for your customers to know you have increased your prices due to your relative increased costs.