Improved margins for supplies
Margins improved for nine industries that make factory operating materials and supplies and held steady for seven others. But plant engineers still face a challenging environment for buying supplies. Sporting a margin grade of F (see table, opposite), the surface active agents (SIC 2843) industry spends $57.
Margins improved for nine industries that make factory operating materials and supplies and held steady for seven others. But plant engineers still face a challenging environment for buying supplies.
Sporting a margin grade of F (see table, opposite), the surface active agents (SIC 2843) industry spends $57.42 on direct manufacturing for $100 worth of product, which is $2.37 above average. Producers will close half the profitability gap by the end of the 2003. The supplier’s best argument may be that a chemicals-driven cost increase of 8.3% between February ’02 and May ’03 was not redressed and led to a near-record low level of manufacturing-related margins.
The fabricated plate work industry also has an F grade. An analysis of margins suggests that suppliers have the cost justification for increasing prices by 1.4%. U.S. demand for metal plate work will see a dramatic improvement in 2004 as end-markets growth hits a year-over-year rate of 6.1% in 2004:Q3. Stronger end-markets won’t translate into stronger price hikes. Over the last few years, we’ve seen a disconnect between demand and prices thanks to competition from foreign suppliers. Tags for fabricated plate work will edge ahead 0.8% in 2004.
Ball and roller bearings manufacturers have done a better job stemming margin losses, as evidenced by their average C margin grade. In July 2003, the cost of making a unit of output in SIC 3562 fell 0.6% with the bulk of the decline due to a 1.5% drop in wage rates paid to factory workers. Producers generated additional savings from U.S.-made steel inputs. Cost savings did not translate into lower output prices in July. Indeed, buyers won’t see any price relief ahead. A battle between prices and costs will rage in the U.S. bearings industry. From 2003:Q4 to 2004:Q4 industry tags will rise 1.7% while costs will grow 1.3%.
|Average Product Prices||Direct Mfg. Costs||Growth in U.S. End Markets|
|NC means data could not be computed.
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: email@example.com).
|Industry||SIC||April 03||July 03||Costs are…||Grade||April 03||July 03|
|Wood Pallets and Skids||2448||-0.97||0.48||rising||F-||-0.25||-0.31|
|Polishes and Sanitation Goods||2842||-0.23||0.15||stable||F||0.34||0.28|
|Surface Active Agents||2843||-1.05||-0.26||stable||F||0.64||0.23|
|Adhesives and Sealants||2891||0.02||0.08||falling||F||2.23||1.34|
|Lubricating Oils and Greases||2992||0.93||1.59||stable||A||0.27||0.18|
|Rubber and Plastics Hose and Belting||3052||0.83||1.66||stable||D||1.83||1.46|
|Steel Wire and Related Products||3315||1.21||1.45||stable||D||-1.85||-1.03|
|Copper Rolling and Drawing||3351||-2.23||-2.28||rising||F||-2.04||-1.81|
|Nonferrous Wire Drawing and Insulating||3357||-3.48||-2.17||stable||F||5.01||5.68|
|Heating Equipment, except Electric||3433||0.81||1.07||stable||C||-1.62||-0.82|
|Fabricated Plate Work, Boiler Shops||3443||1.13||0.99||stable||F||-3.15||-2.05|
|Bolts, Nuts, Rivets and Washers||3452||0.14||0.11||stable||F||5.66||6.10|
|Fluid Power Valves and Hose Fittings||3492||1.08||1.16||stable||B||-2.07||-1.59|
|Other Valves and Pipe Fittings||3494||0.76||1.71||stable||C||-2.07||-1.59|
|Miscellaneous Fabricated Wire Products||3496||-0.17||-0.24||stable||F||-0.29||-0.09|
|Fabricated Pipe and Fittings||3498||0.38||0.87||stable||D||-2.07||-1.59|
|Ball and Roller Bearings||3562||0.87||1.07||falling||C||0.41||0.48|