Grades plunge to D and below

Overall, costs for manufacturers of factory materials and supplies continue to rise at a fairly brisk pace. In the three months ending January 2003, production costs rose 0.7%. That's a far cry from the 0.8% drop in costs that manufacturers enjoyed January 2002. The problem, of course, is that prices for the products sold did not keep pace with costs.


Overall, costs for manufacturers of factory materials and supplies continue to rise at a fairly brisk pace. In the three months ending January 2003, production costs rose 0.7%. That's a far cry from the 0.8% drop in costs that manufacturers enjoyed January 2002.

The problem, of course, is that prices for the products sold did not keep pace with costs. So with margins under pressure and a possible war-induced recession looming, what prospects do plant engineers face for keeping their budgets from falling apart?

The table of margin grades calls the shots. Today, a total of 10 industries are sporting margin grades of D or below. Three months ago, only one — metal fasteners (SIC 3452) — graced the poor-man's list of F- industries. Now three others also show record-breaking low margins, including copper rolling (SIC 3351), nonferrous wire drawing (SIC 3357), and surface active agents (SIC 2843).

Despite these pressure spots, plant engineers may find some useful negotiation opportunities in industries that show an A or B grade in the margin column. For example, the industrial valves (SIC 3491) industry shows a B grade in its margin column and will demonstrate some price discounting abilities in the months ahead. This industry can afford to discount prices by only 0.6% at the moment. But with forecasts showing tags rising 0.5% in 2003:Q1 and another 0.8% in 2003:Q2, discounting abilities could soon reach nearly 2%.

Leaping to the chemicals sector, we see that prices for lubricating oils and greases (SIC 2992) will stay on an upward path in the first half of 2003. Although price hikes of 0.2% in 2003:Q1 and 0.3% in 2003:Q2 won't cover fresh cost increases, producers in SIC 2992 will maintain a collective discounting ability of at least 3%.

Price/cost/demand roundup

Average Product Prices Average Product Prices Direct Mfg. Costs Direct Mfg. Costs Growth in U.S. End Markets Growth in U.S. End Markets
Industry SIC Oct 02 Jan 03 Costs are... Grade Oct 02 Jan 03

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.

Wood Pallets and Skids2448-2.29-2.19stableC-2.03-0.86
Polishes and Sanitation Goods2842-0.16-0.21stableC-0.540.02
Surface Active Agents2843-0.97-1.28risingF--0.770.29
Adhesives and Sealants28910.840.26risingD-0.031.67
Lubricating Oils and Greases29921.821.05stableA-0.650.04
Rubber and Plastics Hose and Belting30520.650.21risingC-1.260.91
Abrasive Products3291-0.49-0.44stableF-0.951.55
Steel Wire and Related Products3315-0.540.22fallingD-2.10-1.98
Copper Rolling and Drawing3351-5.30-3.18risingF--3.38-2.99
Nonferrous Wire Drawing and Insulating3357-4.60-4.12risingF-0.392.85
Heating Equipment, except Electric34330.750.58stableD-2.24-1.84
Fabricated Plate Work, Boiler Shops34430.720.79stableC-6.70-5.13
Bolts, Nuts, Rivets and Washers34520.260.22stableF-0.083.36
Industrial Valves34911.241.26stableB-3.41-2.72
Fluid Power Valves and Hose Fittings34921.141.15stableB-3.41-2.72
Other Valves and Pipe Fittings34941.620.76stableC-3.41-2.72
Miscellaneous Fabricated Wire Products3496-0.11-0.10stableF-1.56-0.63
Fabricated Pipe and Fittings3498-0.49-0.23stableF-3.41-2.72
Ball and Roller Bearings35620.430.65stableC-3.36-0.94

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.
September 2018
2018 Engineering Leaders under 40, Women in Engineering, Six ways to reduce waste in manufacturing, and Four robot implementation challenges.
GAMS preview, 2018 Mid-Year Report, EAM and Safety
June 2018
2018 Lubrication Guide, Motor and maintenance management, Control system migration
August 2018
SCADA standardization, capital expenditures, data-driven drilling and execution
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
Spring 2018
Burners for heat-treating furnaces, CHP, dryers, gas humidification, and more
August 2018
Choosing an automation controller, Lean manufacturing
September 2018
Effective process analytics; Four reasons why LTE networks are not IIoT ready

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.
Material Handling
This digital report explains how everything from conveyors and robots to automatic picking systems and digital orders have evolved to keep pace with the speed of change in the supply chain.
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.
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.
Design of Safe and Reliable Hydraulic Systems for Subsea Applications
This eGuide explains how the operation of hydraulic systems for subsea applications requires the user to consider additional aspects because of the unique conditions that apply to the setting
click me