In waiting mode for high demand

The economic uncertainty that existed prior to the U.S. bombing of Iraq has dissipated. Yet, an unleashing of pent-up demand has not occurred as some pundits expected. Indeed, more than half of the industries in our construction supplies index actually faced shrinking end markets in May 2003. Moreover, all but one industry (flat glass) sport end-market growth rates that fall short of the averag...

08/06/2003


The economic uncertainty that existed prior to the U.S. bombing of Iraq has dissipated. Yet, an unleashing of pent-up demand has not occurred as some pundits expected. Indeed, more than half of the industries in our construction supplies index actually faced shrinking end markets in May 2003. Moreover, all but one industry (flat glass) sport end-market growth rates that fall short of the average growth rate experienced over the past five years. Widespread demand weakness has clearly put the kibosh on aggressive pricing.

So buyers continue to have a clear advantage when it comes to using demand-related data in a negotiation setting. But plant engineers who expect their budgets to stretch farther as they reap the benefits of this economic weakness may be in for a shock. That's because falling prices and rising costs have squeezed margins so tightly that suppliers will be ready to leap with smart price hikes as soon as demand picks up in 2004.

Consider the mineral wool industry. Makers of fiberglass insulation saw their average product prices rise only 0.2% in the 12 months ending May 2003. From a year ago, prices actually fell 0.15% while the cost to manufacture fiberglass increased a wicked 4.8%. The result: fiberglass manufacturers saw their manufacturing margins fall $2.33 for every $100 of product they sold in May. To restore margins to levels held on average over the past five years would require a 5.3% average price hike.

The flat glass industry, where end-market demand has been extraordinarily strong, faces similar margin pressures. Here, despite a 9% growth rate in the end-markets that buy glass, margins shrinkage remains a problem as cost escalation continues to outpace the rate at which producers can increase their prices.

Price/cost/demand roundup

Average Product Prices1Change, %, During 12-Mo Ending...

Direct Mfg. Costs2and Margins Grade

Growth in U.S. End Markets3Change, %, During 12-Mo Ending...

Industry

SIC

Feb 03

May 03

Costs are...

Grade

Feb 03

May 03

NC means data could not be computed.
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).

General Sawmills and Planing Mills

2421

-1.41

-2.27

stable

F

-0.91

-1.25

Millwork

2431

0.12

0.24

stable

B

-2.22

-1.43

Hardwood Veneer and Plywood

2435

-0.07

-0.90

rising

C

-1.10

-0.81

Softwood Veneer and Plywood

2436

-3.66

-6.18

stable

D

-1.10

-0.81

Metal Partitions and Fixtures

2542

-0.81

-0.42

stable

F

-3.01

-2.46

Paints and Allied Products

2851

1.47

1.65

stable

C

0.58

1.00

Flat Glass

3211

-1.76

-0.61

falling

D

7.51

9.05

Other Structural Clay Products

3259

5.23

6.46

stable

A

-2.23

-1.44

Gypsum Products

3275

8.12

6.94

stable

D

-3.15

-2.88

Mineral Wool

3296

0.53

0.20

stable

F

-0.43

0.21

Steel Pipe and Tubes

3317

6.48

8.98

stable

A

NC

NC

Plumbing Fittings and Brass Goods

3432

0.36

0.71

stable

F

-2.55

-1.76

Metal Doors, Sash and Trim

3442

0.61

0.95

stable

C

-2.95

-2.33

Sheet Metal Work

3444

1.53

2.05

stable

D

3.80

5.30

Refrigeration and Heating Equipment

3585

0.33

0.37

stable

F

0.35

0.78

Current-Carrying Wiring Devices

3643

-0.14

0.38

stable

F

1.46

3.02

Noncurrent-Carrying Wiring Devices

3644

1.53

1.02

falling

F

1.46

3.02

Commercial Lighting Fixtures

3646

-0.14

0.70

stable

D

-1.79

-1.15

Environmental Controls

3822

0.11

0.24

stable

F-

-2.01

-1.67





No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
Prescriptive maintenance; Hannover Messe 2017 recap; Reduce welding errors
Safety standards and electrical test instruments; Product of the Year winners; Easy and safe electrical design
Safer human-robot collaboration; 2017 Maintenance Survey; Digital Training; Converting your lighting system
Mobility as the means to offshore innovation; Preventing another Deepwater Horizon; ROVs as subsea robots; SCADA and the radio spectrum
Future of oil and gas projects; Reservoir models; The importance of SCADA to oil and gas
Big Data and bigger solutions; Tablet technologies; SCADA developments
Automation modernization; Predictive analytics enable open connectivity; System integration success; Automation turns home brewer into brew house
Commissioning electrical systems; Designing emergency and standby generator systems; Paralleling switchgear generator systems
Natural gas for tomorrow's fleets; Colleges and universities moving to CHP; Power and steam and frozen foods

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

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Featured articles highlight technologies that enable the Industrial Internet of Things, IIoT-related products and strategies to get data more easily to the user.
Compressed air plays a vital role in most manufacturing plants, and availability of compressed air is crucial to a wide variety of operations.
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Maintenance Manager; California Oils Corp.
Associate, Electrical Engineering; Wood Harbinger
Control Systems Engineer; Robert Bosch Corp.
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me