Inside the price outlook for wood

Plant engineers were whipsawed in early 1999 by rising wood prices. But now costs for hardwood and softwood are on the decline. Unfortunately, buyers of plywood still need to be on guard.

08/01/2000


Plant engineers were whipsawed in early 1999 by rising wood prices. But now costs for hardwood and softwood are on the decline. Unfortunately, buyers of plywood still need to be on guard. In May, deflation came to the softwood plywood (SIC 2436) industry. Average industry prices fell 8.8% despite only a 2.1% drop in per-unit manufacturing costs. With prices falling so much faster than costs, industry margins will face a loss of $5.39/$100 of product sold. Over the last 12 mo, margins have lost $14.68/$100 of product. As one might expect, recent losses have put industry margins on the critical list and SIC 2436 earned a below average D margin grade. Consequently, plant engineers who buy a lot of plywood should be on guard. Tags have probably hit bottom and may rebound slightly in upcoming months.

Although plywood won't offer much in the way of price cuts ahead, buyers still can find opportunities in the wood products arena. In the millwork (SIC 2431) industry, for example, producers increased prices an average of 0.2% in May. Thanks to a 1.9% reduction in per-unit manufacturing costs, inflation-adjusted margins in SIC 2431 expanded by $1.52/$100 of product. Bottom line: Buyers have cost/price trends on their side when they come to the negotiation table.

Price/cost/demand roundup

IndustrySICAverage Product Prices1Change, %, During 12-Mo Ending...Feb 00Average Product Prices1Change, %, During 12-Mo Ending...May 00Direct Mfg. CostsDirect Mfg. CostsGrowth in U.S. End Markets3Change, %, During 12-Mo Ending...Feb 00Growth in U.S. End Markets3Change, %, During 12-Mo Ending... May 00


General sawmills and planing mills


2421


5.72


5.40


Falling


D


4.24


3.64


Millwork


2431


2.13


2.11


Falling


B


6.88


6.62


Hardwood veneer and plywood


2435


1.00


1.88


Falling


B


4.57


4.39


Softwood veneer and plywood


2436


14.47


5.98


Falling


D


4.57


4.39


Metal partitions and fixtures


2542


0.87


0.75


Rising


C


6.79


7.06


Paints and allied products


2851


1.48


1.59


Rising


C


7.25


6.76


Flat glass


3211


-2.27


-0.31


Stable


F


20.06


22.54


Other structural clay products


3259


1.42


2.13


Stable


B


7.20


7.07


Gypsum products


3275


18.29


16.48


Stable


A


4.65


3.90


Mineral wool


3296


8.29


4.71


Stable


C


6.00


5.65


Steel pipe and tubes


3317


-3.30


-0.44


Stable


A


3.89


5.32


Plumbing fittings and brass goods


3432


1.61


2.21


Stable


B


6.68


6.45


Metal doors, sash, and trim


3442


0.70


1.01


Stable


B


6.51


6.19


Sheet metal work


3444


0.15


0.29


Stable


C


19.80


21.43


Refrigeration and heating equipment


3585


0.18


-0.17


Stable


C


8.56


7.51


Current-carrying wiring devices


3643


0.02


0.09


Stable


F-


21.16


21.69


Noncurrent-carrying wiring devices


3644


-1.85


-0.55


Rising


D


21.16


21.69


Commercial lighting fixtures


3646


-0.41


-0.62


Stable


F-


7.81


7.73


Environmental controls


3822


0.12


-0.11


Rising


D


6.49


6.28


1Average 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.

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.

3Growth 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).





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