Double trouble for those seeking operating materials

Plant engineers who need to stock up on operating materials and supplies may be facing a double whammy this spring. Two trends will be converging to push up prices. One: The majority of industries that make operating supplies appears to be under extremely tight margin pressure. Two: End-market demand for supplies has begun to grow briskly.


Plant engineers who need to stock up on operating materials and supplies may be facing a double whammy this spring. Two trends will be converging to push up prices. One: The majority of industries that make operating supplies appears to be under extremely tight margin pressure. Two: End-market demand for supplies has begun to grow briskly.

Consider the case of copper rollers, drawers and extruders. This industry sports an F-minus margin grade. Copper extruders currently spend $80.12, on average, to manufacture $100 of market-valued output. That's $5.07 above spending levels held over the past five years.

On the demand side of the equation, end-markets that buy extruded copper saw their factory production grow 10.2% in October 2004. That's up from 8.5% three months earlier. As a result, supplier pricing power is very strong and improving at an accelerating pace.

Average product prices increased at a year-over-year pace of 22.1% in September, up from 20.4% in August. In October alone, prices jumped 5%, up from a 0.8% price hike three months earlier. Thinking Cap Solutions forecast prices for rolled and drawn copper to rise 1.3% in 2004:Q4 and another 0.5% in 2005:Q1.

Cost/price escalation analysis suggests suppliers must hike prices 7.8% in order to earn a fair return on manufacturing-related spending. The entire argument for such an increase can be constructed with price/cost data from the last 12 months.

Buyers of extruded copper should be prepared to discuss primary copper costs. This is the copper extruder's number-one inflation risk. Over the last 12 months, tags for this fickle red metal soared 51.6%. Scrap costs are also a major cost concern.

Price/cost/demand roundup

Operating materials & supplies Average Product Prices (1) % Change Direct Manufacturing Costs (2) and Margins Grade Growth in U.S. End Markets (3) % Change During 12 Months Ending
Industry 3 months ago Current month Costs are Grade 3 months ago Current month
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.
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.
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:
Wood pallets1.942.40falling fastC0.241.11
Polishes & specialty cleaning preparations-0.10-0.09risingF-0.261.20
Surface active agents & related agents0.140.66risingD1.763.64
Lubricating oils & greases2.913.84risingF0.741.69
Rubber & plastic hoses & belting2.292.23stableD3.895.30
Abrasives-coated products0.630.23stableC6.447.96
Steel wire drawing1.432.94stableB0.562.11
Copper rolling, drawing & extruding0.805.01rising fastF-6.248.78
Insulated wire & cable-0.352.69risingF8.5010.23
Heating equipment1.631.83stableF0.711.98
Fabricated metal plate work0.280.07stableF10.7011.48
Bolts, nuts, screws, rivets & washers0.070.24stableF-7.088.26
Industrial valves1.451.44stableF2.634.17
Fluid power valves & hose fittings1.361.47risingF-2.634.17
Metal & plastic plumbing fixture fittings0.820.81risingF-2.634.17
Metal cloth, fence & other wire products0.320.40stableF1.482.89
Fabricated metal pipes & fittings1.491.92stableC0.582.18
Ball & roller bearings1.231.18stableF3.144.77

Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2017 Top Plant.
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.
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
March 2018
SCCR, 2018 Maintenance study, and VFDs in a washdown environment.
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
December 2017
Product of the Year winners, Pattern recognition, Engineering analytics, Revitalize older pump installations
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

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 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.
Maintenance & Safety
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
Industrial Analytics
This digital report explains how plant engineers and subject matter experts (SME) need support for time series data and its many challenges.
IIoT: Operations & IT
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
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