Between March and June, prices for many key commodities have been on the rebound. The result: inflation has started to rear its ugly head, creating cost control concerns for many industries that make the equipment and tools that plant engineers use. For example, with prices for steel heating up, makers of materials handling equipment are beginning to experience an upturn in manufacturing costs.
Between March and June, prices for many key commodities have been on the rebound. The result: inflation has started to rear its ugly head, creating cost control concerns for many industries that make the equipment and tools that plant engineers use.
For example, with prices for steel heating up, makers of materials handling equipment are beginning to experience an upturn in manufacturing costs. Although it's unlikely higher costs translated into higher product prices over the summer months, buyers should be on guard this autumn. Since the announcement of tariffs on imported steel, materials handling industries have experienced erosion in margins that can be traced directly to increased spending on steel. In three of these industries, margin losses are approaching $1 for each $100 of product sold.
Makers of conveyors and conveying equipment (SIC 3535) face the most serious inflation challenge. Since March, per-unit spending on manufacturing has increased 0.77% while industry product prices have tumbled 0.87%. This escalation disparity has lowered margins by 96 cents for each $100 of product sold. About 4/5 of this margin loss can be attributed to an increase in raw materials costs. A roundup of 3-month cost increases for key inputs shows: carbon sheet and strip up 9.47%; carbon steel bars up 2.11%; and other carbon steel shapes up 3.67%. While all of this is clearly bad news for producers, higher costs should play a limited role in negotiations. Thinking Cap Solutions' cost model calculates that margins in SIC 3535 remain above normal. The same can be said for margins in the elevator (SIC 3534) and hoist, crane and monorail (SIC 3536) industries. Makers of industrial lift trucks (SIC 3537), on the other hand, face below-average margins.
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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