Piping system costs could fall this summer

Opportunities to push for lower prices abound for plant engineers who are buying operating materials this summer. With a margin “grade” of A+, the industry that makes “other valves and pipe fittings” is an excellent case in point. This industry makes metal fittings, flanges, and unions for piping systems.

In the past 12 mo, average product prices have risen 1%. Looking at product price levels in April 1999 compared to April 1998, prices are up 2.5%. But the costs to manufacture these same products are down 2.7%.

That’s because direct materials costs, particularly copper pipe and tube costs, have fallen significantly. Plant managers who are aware of these price/cost trends will find they have room to negotiate for better deals.

The table, “Price/cost/demand roundup” (right), shows that 15 industries have a margin grade of A to A+. Basically, this means price/cost trends have pushed industry margins to record or new-record highs.

The Plant Engineering Operating Materials and Supplies cost and price indexes fell in lockstep during the latest 3-mo period. Prices for materials sold to plant engineers and others fell 0.6% while producers’ costs to manufacture plant supplies fell 0.7%.

Over the entire previous 12-mo period, however, producer prices have fallen less rapidly than the cost to manufacture. Average product prices during this period have fallen 14.7%. At the same time, direct manufacturing costs during this period have dropped 18.5%.

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