Metal prices drop

Basic metal prices fell sharply in 2001. For example, average wholesale prices for U.S.-made steel fell 6.5%, U.S. copper tags declined 16% and domestic aluminum prices dropped 12.6%. But have plant engineers who buy metal products seen any of the deflation benefit? Not enough of it, for while materials costs have been falling, downstream metal producers have managed to pass along only a ...
By Staff February 15, 2002

Basic metal prices fell sharply in 2001. For example, average wholesale prices for U.S.-made steel fell 6.5%, U.S. copper tags declined 16% and domestic aluminum prices dropped 12.6%. But have plant engineers who buy metal products seen any of the deflation benefit? Not enough of it, for while materials costs have been falling, downstream metal producers have managed to pass along only a small portion of the savings to buyers.

Deflation trends in primary metals instead have been used to boost fabricated metal margins. Looking at the Plant Engineering price/cost table we see that makers of metal doors and trim have been the most aggressive deflation opportunists. Thanks to a 3.2% decline in the industry’s materials costs, the cost to manufacture metal doors dropped 1.7% between November 2000 and November 2001. But average prices that plant engineers and everyone else paid for metal doors rose 1.3%. As a result, SIC 3442 enjoys a margin grade of A.

The sheet metal work industry (SIC 3444) has also kept a large portion of their metals cost savings from buyers. Here direct manufacturing costs declined 2.3% between November 2000 and November 2001. Buyers of sheet metal work can construct good arguments to capture more cost savings by focusing on the cost of raw materials. We saw per-unit cost declines of 17.4% for stainless steel sheet and strip, 8.1% for carbon steel sheet and strip, and 3.5% for aluminum sheet and plate.

Forecasts from Thinking Cap Solutions suggest such strong deflationary trends will help keep the lid of prices in 2002. Average sheet metal work prices are predicted to rise just 0.5% in 2002.

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
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.

General Sawmills and Planing Mills 2421 -6.67 -4.86 stable F -1.59 -2.02
Millwork 2431 1.31 1.86 falling A+ 2.63 1.72
Hardwood Veneer and Plywood 2435 0.84 0.20 falling A -0.38 -1.27
Softwood Veneer and Plywood 2436 -6.45 -3.61 stable D -0.38 -1.27
Metal Partitions and Fixtures 2542 0.98 0.79 stable B 1.63 0.55
Paints and Allied Products 2851 2.37 2.40 falling A -1.98 -2.60
Flat Glass 3211 0.99 0.69 stable F 5.56 -2.14
Other Structural Clay Products 3259 6.96 7.27 rising A 3.21 2.10
Gypsum Products 3275 -25.86 -24.43 stable D -0.38 -0.54
Mineral Wool 3296 -3.15 -1.03 stable C 1.05 0.42
Steel Pipe and Tubes 3317 -0.10 -2.10 stable B -2.22 -4.93
Plumbing Fittings and Brass Goods 3432 0.15 -0.83 stable B 2.41 1.50
Metal Doors, Sash and Trim 3442 1.41 1.27 stable A 2.10 1.33
Sheet Metal Work 3444 0.63 0.02 stable B 6.32 -0.37
Refrigeration and Heating Equipment 3585 -0.22 -0.05 stable D -3.98 -3.41
Current-Carrying Wiring Devices 3643 -0.78 -0.62 stable F 6.62 0.71
Noncurrent-Carrying Wiring Devices 3644 1.54 2.10 stable A 6.62 0.71
Commercial Lighting Fixtures 3646 0.17 -0.14 stable D 1.33 0.17
Environmental Controls 3822 0.26 0.13 stable D 0.89 0.61

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