Demand slows and bargains grow

The slowing economy is taking its toll on manufacturers and may be creating opportunities for plant engineers to bargain for better deals. All 19 industries that make factory construction and maintenance supplies are registering slowdowns in end-market growth. Most notably, in the 12-mo period ending February 2001, end markets that use products from sawmills fell 0.
By Staff May 1, 2001

The slowing economy is taking its toll on manufacturers and may be creating opportunities for plant engineers to bargain for better deals. All 19 industries that make factory construction and maintenance supplies are registering slowdowns in end-market growth. Most notably, in the 12-mo period ending February 2001, end markets that use products from sawmills fell 0.1%, and end markets for the heating equipment industry declined 1.67%. Both these industries are struggling with low inflation-adjusted margins.

Four industries in our construction supplies market basket remain prime targets for price cuts because margins are strong while demand is slowing. The millwork (SIC 2431), hardwood plywood (SIC 2436), steel pipe and tubes (SIC 3317), and vitrified clay sewer and other structural clay products (SIC 3259) industries all enjoy A or A+ margin grades, according to our industry cost escalation model. Remember, an A+ grade means the combination of rising product prices and more slowly rising or falling manufacturing costs are blessing the A+ industry with record-high margins.

Price/cost/demand roundup

Industry SIC Average Product Prices Average Product Prices Direct Mfg. Costs Direct Mfg. Costs Growth in U.S. End Markets Growth in U.S. End Markets
General sawmills and planing mills 2421 -4.12 -8.40 Falling D 1.72 -0.01
Millwork 2431 0.75 0.56 Rising A 4.77 3.38
Hardwood veneer and plywood 2435 1.77 1.51 Stable A+ 3.19 1.75
Softwood veneer and plywood 2436 -15.17 -17.71 Falling F 3.19 1.75
Metal partitions and fixtures 2542 0.48 0.61 Stable B 5.14 3.37
Paints and allied products 2851 2.13 2.19 Rising D 4.10 1.24
Flat glass 3211 1.29 0.98 Rising F 28.97 28.32
Other structural clay products 3259 3.70 5.60 Stable A+ 5.41 4.06
Gypsum products 3275 1.09 -11.58 Stable F- 1.86 0.49
Mineral wool 3296 -1.96 -3.18 Stable D 3.92 2.26
Steel pipe and tubes 3317 4.13 4.13 Stable A 6.48 4.29
Plumbing fittings and brass goods 3432 2.69 2.26 Stable B 4.63 3.25
Metal doors, sash, and trim 3442 1.76 1.81 Stable C 4.29 2.89
Sheet metal work 3444 1.10 1.26 Stable C 25.24 23.87
Refrigeration and heating equipment 3585 -0.28 -0.19 Stable F 2.59 -1.67
Current-carrying wiring devices 3643 -0.69 -0.62 Stable F 21.66 20.58
Noncurrent-carrying wiring devices 3644 0.85 0.84 Stable C 21.66 20.58
Commercial lighting fixtures 3646 0.00 0.36 Stable D 6.29 4.82
Environmental controls 3822 0.15 0.27 Stable D 4.49 2.05

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.

All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-452-6159; e-mail: ebaatz@ice-alert.com ).