Trouble for wood buyers
Staff -- Plant Engineering, 8/1/2001
Plant engineers may have noticed that their budget for wood products isn't buying as much as it used to. A trade dispute between the U.S. and Canada has tightened supplies of lumber. As a result, prices for some lumber products popped in May 2001. For example, compared to a year earlier, prices for southern CDX interior sheathing jumped 19.9% while light framing pine lumber prices also increased 17.8% and tags for western hemlock lumber surged 16.9%.
This inflationary environment helped the softwood plywood (SIC 2436) industry to pull off the greatest bottom-line victory. Here, average prices in May 2001 increased 19.1% from April and 9% from a year ago. Factory buyers, however, may find May's price hike was an aberration that will not lead to future price concessions, for during the entire 12-month period ending May 2001, average softwood plywood prices actually fell 17.5%.
The slowdown in demand that we commented on three months ago has become considerably more noticeable. Again, end-markets for all the industries in our construction and maintenance supplies group continued slowing from a quarter ago. Now four industries have actually seen their end-markets decline. However, manufactures of flat glass, sheet metal work and wiring devices continue to enjoy double-digit end-market growth, so factory managers who buy these supplies had better stay on their toes.
| Average Product Prices1 Change, %, During 12-Mo Ending... | Direct Mfg. Costs2 and Margins Grade | Growth in U.S. End Markets3 Change, %, During 12-Mo Ending... | |||||
| Industry | SIC | Feb 01 | May 01 | Costs are... | Grade | Feb 01 | May 01 |
| General sawmills and planing mills | 2421 | -8.38 | -9.61 | Rising | B | 0.05 | -1.24 |
| Millwork | 2431 | 0.57 | 0.53 | Rising | C | 3.61 | 2.76 |
| Hardwood veneer and plywood | 2435 | 1.49 | 1.19 | Rising | B | 1.81 | 0.63 |
| Softwood veneer and plywood | 2436 | -17.70 | -17.47 | Rising | B | 1.81 | 0.63 |
| Metal partitions and fixtures | 2542 | 0.68 | 0.63 | Stable | B | 3.51 | 2.11 |
| Paints and allied products | 2851 | 2.16 | 2.19 | Falling | C | 1.18 | -0.87 |
| Flat glass | 3211 | 1.18 | 1.13 | Rising | F- | 27.95 | 22.36 |
| Other structural clay products | 3259 | 5.59 | 6.43 | Stable | A | 4.29 | 3.42 |
| Gypsum products | 3275 | -11.49 | -20.74 | Stable | F- | 0.74 | -0.08 |
| Mineral wool | 3296 | -3.02 | -3.72 | Stable | D | 2.51 | 1.41 |
| Steel pipe and tubes | 3317 | 3.93 | 2.26 | Stable | A | 4.33 | 1.18 |
| Plumbing fittings and brass goods | 3432 | 2.21 | 1.40 | Stable | C | 3.46 | 2.58 |
| Metal doors, sash, and trim | 3442 | 1.82 | 1.59 | Stable | C | 3.11 | 2.27 |
| Sheet metal work | 3444 | 1.24 | 1.06 | Stable | B | 23.90 | 19.43 |
| Refrigeration and heating equipment | 3585 | -0.18 | -0.23 | Stable | F | -1.34 | -4.08 |
| Current-carrying wiring devices | 3643 | -0.65 | -0.65 | Stable | F | 20.45 | 17.11 |
| Noncurrent-carrying wiring devices | 3644 | 0.81 | 0.92 | Falling | C | 20.45 | 17.11 |
| Commercial lighting fixtures | 3646 | 0.37 | 0.63 | Stable | F | 4.10 | 2.94 |
| Environmental controls | 3822 | 0.27 | 0.36 | Stable | D | 2.49 | 0.83 |
| 1 Average product price changes are calculated from the producer price index for each 4-digit SIC (standard industrial classification) industry from the U.S. Bureau of Labor Statistics. 2 Analyses of each industry's direct manufacturing cost changes are from Thinking Cap Solutions, Inc.'s proprietary Industry Cost Escalation (ICE) model. The "grade" indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs. 3 Growth in U.S. end markets data are from the ICE model and are estimates of output for the domestic end markets which purchase a given industry's products. All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-452-6159; e-mail: ebaatz@ice-alert.com). | |||||||
