Manufacturers are facing a double problem with metal prices as rising global demand leads to fluctuating costs and availability issues.

While production firms have been cheered by the return from recession, the improvement in industry worldwide has created a new problem for companies with raw materials increasing by up to 17 per cent in three months and huge lead times for more unusual metals.

Firms are also struggling against far more fluctuations in metal prices than historically usual after a ground-breaking change in the iron ore price system meant prices move more in line with the markets.

Warren Gray, sales director of Redditch-based precision machinist firm Machined Component Systems, said the company had seen a rise in all of the metals it uses.

However, he said demand for certain rarer metals has meant some items that the firm’s stockists have not run out of for more than 30 years are unaccessible.

He said: “Availability is a bigger problem than price. Yes, price has been an issue but our customers understand that raw materials are a moving variable.

“I can share invoice costs with them and they will see that we were paying a lot less three months ago compared to now.”

He added: “The biggest problem is the amount of lead time required to order metals because they have become so scarce.

“You have to ensure you have it ordered in advance and there are items we had in stock three months ago and we can’t get now.

“We have got one particular situation where we can’t manufacture something for a customer because we can’t get the particular metal needed for the job.

“There is a six-month lead time so even if we ordered it straight away it wouldn’t be available until April or May.”

Mr Gray said the firm, which employs 27 people and is set to turn over £2.2 million this year, had seen the stainless steel price increase by 15 per cent in three months, while mild steels have risen by more than five per cent, and copper has soared by 17 per cent since July.

He said supply problems at the company, which supplies Stana Stairlifts, Land Rovers and to the oil and gas industries, have not been helped by the mill capacity in Europe failing to get back to full capacity.

Meanwhile, Gerry Dunne, managing director of Westley Engineering, said his biggest problem has been a change in the iron ore price system, which has meant far more movement in prices.

Mr Dunne said a deal by Vale of Brazil and Anglo-Australian BHP Billiton with Japanese and Chinese mills earlier this year to put an end to a 40-year-old benchmark system has meant prices are far more volatile.

He said the industry has agreed to move to quarterly contracts linked to the nascent iron ore spot market.

He said: “We have seen price increases by small amounts this year, but it is moving a lot. There hasn’t been great amounts of difference. The problem is in the past there was more stability month-to-month but it has become more changeable, and that creates problems.

“When it goes up and down by £10 or £20 a tonne and keeps occuring it can be difficult because you can’t agree it without the customer. And the price can start to mount up after a few months.”

The company, which employs 25 people, largely supplies into the automotive industry, but also into the windows, air conditioning and building products sectors and orders mild steels and stainless steels.

Simon Griffiths, chief executive of the Manufacturing Advisory Service – West Midlands, said rising metals prices were hurting firms in the region.

He said: “Figures recently published by Markit Economics and AWM indicate that businesses in the region have experienced their 14th consecutive rise in input prices – a lot of the cost rises are attributed to higher prices for energy and raw materials.

“However, output prices have not risen to the same degree and it looks as though businesses are being cautious and not increasing sales prices to remain competitive and retain market share. This will result in a significant cost-price squeeze, which is a potential cause for concern in the future.”