Bearings negotiations toughe
Prices for ball and roller bearings (SIC 3562) rose sharply in January, up 0.36%. ICE model data suggest the bulk of this increase went toward improving SIC 3562's bottom line. With the cost of making a typical unit of industry output rising just 0.
Prices for ball and roller bearings (SIC 3562) rose sharply in January, up 0.36%. ICE model data suggest the bulk of this increase went toward improving SIC 3562's bottom line. With the cost of making a typical unit of industry output rising just 0.09% last month, calculations show producers stand to realize an inflation-adjusted margin gain of $0.14 for every $100 of product sold. Margins now have increased in three of the last four months.
Two important trends are currently shaping our price expectations for ball and roller bearings. First, demand strength for SIC 3562 continues to improve. For the year ending in January, U.S. end markets expanded 4.27%. This is the highest growth rate seen since late 1998 and provides a platform for higher prices. Second, inflation-adjusted margins remain a little below their year-ago level. This also puts pressure on producers to increase tags. Short-run analysis indicates producers need a 0.28% price hike on the average product to restore margins to their year-ago level.
Bottom line: The factory manager who wants to fight a price increase should keep their bearings supplier focused on the long run. Ask the supplier why it hasn't shared previous inflation-related margin gains with its customers.
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+ means 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.
* Price data are not available (na) for rubber hose and belting and cost data from the ICE model are shown instead.
All data prepared and presented by Thinking Cap Solutions Inc., Port Angeles, WA (telephone: 360-452-6159; email: email@example.com)
- Events & Awards
- Magazine Archives
- Oil & Gas Engineering
- Salary Survey
- Digital Reports
Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey