Construction material costs soar

Plant managers may feel they are paying exorbitant prices for gypsum board and softwood plywood. Average prices for gypsum industry products jumped 16% in the 12-mo period ending November 1999. At the same time, softwood plywood prices soared nearly 19%.

02/01/2000


Plant managers may feel they are paying exorbitant prices for gypsum board and softwood plywood. Average prices for gypsum industry products jumped 16% in the 12-mo period ending November 1999. At the same time, softwood plywood prices soared nearly 19%. These price hikes are being driven by strong demand and short supplies. But plant managers who want to try to fight price hikes have some cost analysis ammunition on their side.

For example, the gypsum products (SIC 3275) industry is enjoying record profits now. In November 1999, for every $100 of product sold, gypsum producers are earning an extra $5.88 compared to a year ago. Plant managers who understand and can articulate their knowledge of the growing margin gains that manufacturers are earning may be able to garner some price concessions despite tight supplies.

Here's how the cost structure of the gypsum industry is shaking out. In the 12-mo period ending November 1999, direct labor costs rose only 2.9%, down from 3.5% a year earlier. Domestic direct materials costs for things like paperboard liners, nonmetallic minerals, and crushed stone rose only 1% in November 1999, compared to a 3.5% materials cost escalation rate a year earlier.

Price/cost/demand roundup

Average Product Prices(super 1) Direct Mfg. Costs(super 2) Growth in U.S. End Markets(super 3)

Change, %, During 12 Mo Ending... and Margins Grade Change, %, During 12 Mo Ending...

Industry SIC Aug 99 Nov 99 Costs are... Grade Aug 99 Nov 99

Hand and edge tools 3423 1.24 1.17 Stable A+ 4.24 3.85

General sawmills and planing mills 2421 -1.59 2.46 Stable C 3.72 3.82

Millwork 2431 1.29 1.75 Stable C 4.76 5.33

Hardwood veneer and plywood 2435 -0.55 0.09 Falling A 3.88 3.99

Softwood veneer and plywood 2436 19.52 18.66 Stable D 3.88 3.99

Metal partitions and fixtures 2542 1.07 1.08 Stable B 3.70 4.86

Paints and allied products 2851 1.84 1.64 Stable B 6.65 6.99

Flat glass 3211 -5.07 -3.98 Rising F 17.85 17.91

Other structural clay products 3259 1.92 1.51 Stable D 4.80 5.48

Gypsum products 3275 12.65 15.97 Stable A+ 4.29 4.20

Steel pipe and tubes 3317 -4.09 -4.66 Stable A 1.38 2.47

Plumbing fittings and brass goods 3432 0.29 0.84 Stable B 4.62 5.18

Metal doors, sash, and trim 3442 0.47 0.47 Stable B 4.63 5.11

Sheet metal work 3444 0.64 0.27 Stable B 16.79 17.37

Refrigeration and heating equipment 3585 1.51 1.04 Stable B 8.69 9.00

Current-carrying wiring devices 3643 -0.44 -0.09 Stable C 18.76 19.58

Noncurrent-carrying wiring devices 3644 -2.66 -2.73 Stable C 18.76 19.58

Commercial lighting fixtures 3646 0.09 -0.17 Stable D 6.15 6.80

Environmental controls 3822 0.38 0.40 Stable A 5.60 5.89

(super 1) Average 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.

(super 2) Analyses of each industry's direct manufacturing cost changes are from Thinking Cap Solutions, Inc.'s proprietary Industry Cost Escalation (ICE) model. The "grade" indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for 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.

(super 3) Growth 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: thinkcap@olypen.com).





Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America.
Product of the Year
The Product of the Year program recognizes products newly released in the manufacturing industries.
System Integrator of the Year
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
June 2018
2018 Lubrication Guide, Motor and maintenance management, Control system migration
May 2018
Electrical standards, robots and Lean manufacturing, and how an aluminum packaging plant is helping community growth.
April 2018
2017 Product of the Year winners, retrofitting a press, IMTS and Hannover Messe preview, natural refrigerants, testing steam traps
June 2018
Machine learning, produced water benefits, programming cavity pumps
April 2018
ROVs, rigs, and the real time; wellsite valve manifolds; AI on a chip; analytics use for pipelines
February 2018
Focus on power systems, process safety, electrical and power systems, edge computing in the oil & gas industry
Spring 2018
Burners for heat-treating furnaces, CHP, dryers, gas humidification, and more
April 2018
Implementing a DCS, stepper motors, intelligent motion control, remote monitoring of irrigation systems
February 2018
Setting internal automation standards

Annual Salary Survey

After two years of economic concerns, manufacturing leaders once again have homed in on the single biggest issue facing their operations:

It's the workers—or more specifically, the lack of workers.

The 2017 Plant Engineering Salary Survey looks at not just what plant managers make, but what they think. As they look across their plants today, plant managers say they don’t have the operational depth to take on the new technologies and new challenges of global manufacturing.

Read more: 2017 Salary Survey

The Maintenance and Reliability Coach's blog
Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
One Voice for Manufacturing
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Maintenance and Reliability Professionals Blog
The Society for Maintenance and Reliability Professionals an organization devoted...
Machine Safety
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
Research Analyst Blog
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Marshall on Maintenance
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
Lachance on CMMS
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Electrical Safety Update
This digital report explains how plant engineers need to take greater care when it comes to electrical safety incidents on the plant floor.
Maintenance & Safety
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
IIoT: Machines, Equipment, & Asset Management
Articles in this digital report highlight technologies that enable Industrial Internet of Things, IIoT-related products and strategies.
Randy Steele
Maintenance Manager; California Oils Corp.
Matthew J. Woo, PE, RCDD, LEED AP BD+C
Associate, Electrical Engineering; Wood Harbinger
Randy Oliver
Control Systems Engineer; Robert Bosch Corp.
Data Centers: Impacts of Climate and Cooling Technology
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
Safety First: Arc Flash 101
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
Critical Power: Hospital Electrical Systems
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me