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.
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.
|General sawmills and planing mills||2421||5.72||5.40||Falling||D||4.24||3.64|
|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|
|Other structural clay products||3259||1.42||2.13||Stable||B||7.20||7.07|
|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|
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: email@example.com).