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

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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.

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