Negotiate harder against higher prices
Now may be the time for plant engineers to take a firmer stand against rising prices among providers of construction supplies. Consider, for example, the millwork (SIC 2431) industry.
Now may be the time for plant engineers to take a firmer stand against rising prices among providers of construction supplies. Consider, for example, the millwork (SIC 2431) industry. This industry has made few concessions to weakening construction demand. Over the last 12 mo, millwork tags are down just 55% despite a 5.5% drop in the cost of making a unit of output. Bottom line: Plant engineers who buy millwork products should take a stronger negotiation position.
Stronger negotiation tactics may also serve a legitimate purpose when dealing with producers of precast and other concrete products (SIC 3272). Short-run end-market growth conditions have generated a strong buyers market. Also, profitability analysis indicates inflation-adjusted margins in SIC 3272 are above both their year-ago level and their 5-yr norm. That fact means despite easing demand and the ability to afford a price cut, producers are running in the opposite direction. Last month they pushed prices ahead 0.43%. In 2001, we expect average prices to rise 2.2%.
Price/cost/demand roundup
| General sawmills and planing mills | 2421 | 5.42 | -0.35 | Falling | D | 3.32 | 2.68 |
| Millwork | 2431 | 2.16 | 1.24 | Stable | A | 6.03 | 5.65 |
| Hardwood veneer and plywood | 2435 | 1.65 | 1.87 | Falling | A+ | 4.00 | 3.73 |
| Softwood veneer and plywood | 2436 | 5.98 | -12.20 | Falling | F | 4.00 | 3.73 |
| Metal partitions and fixtures | 2542 | 0.73 | 0.61 | Stable | C | 6.54 | 6.14 |
| Paints and allied products | 2851 | 1.63 | 1.82 | Falling | D | 6.57 | 4.98 |
| Flat glass | 3211 | -0.51 | 0.79 | Stable | F | 22.82 | 25.71 |
| Other structural clay products | 3259 | 2.17 | 2.96 | Stable | A | 6.48 | 6.17 |
| Gypsum products | 3275 | 16.45 | 10.89 | Stable | C | 3.40 | 2.85 |
| Mineral wool | 3296 | 4.82 | 1.40 | Stable | C | 5.16 | 4.75 |
| Steel pipe and tubes | 3317 | -0.51 | 2.20 | Falling | A | 5.25 | 5.68 |
| Plumbing fittings and brass goods | 3432 | 2.18 | 2.69 | Rising | B | 5.87 | 5.50 |
| Metal doors, sash, and trim | 3442 | 1.05 | 1.47 | Stable | C | 5.61 | 5.21 |
| Sheet metal work | 3444 | 0.34 | 0.69 | Stable | C | 21.36 | 23.40 |
| Refrigeration and heating equipment | 3585 | -0.20 | -0.40 | Stable | D | 7.30 | 4.40 |
| Current-carrying wiring devices | 3643 | 0.03 | -0.17 | Stable | F- | 21.40 | 22.15 |
| Noncurrent-carrying wiring devices | 3644 | -0.53 | 0.56 | Stable | D | 21.40 | 22.15 |
| Commercial lighting fixtures | 3646 | -0.62 | -0.28 | Stable | D | 7.44 | 6.91 |
| Environmental controls | 3822 | -0.07 | -0.20 | Stable | C | 5.90 | 5.56 |
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: ebaatz@ice-alert.com).
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