Improved margins for supplies

Margins improved for nine industries that make factory operating materials and supplies and held steady for seven others. But plant engineers still face a challenging environment for buying supplies. Sporting a margin grade of F (see table, opposite), the surface active agents (SIC 2843) industry spends $57.


Margins improved for nine industries that make factory operating materials and supplies and held steady for seven others. But plant engineers still face a challenging environment for buying supplies.

Sporting a margin grade of F (see table, opposite), the surface active agents (SIC 2843) industry spends $57.42 on direct manufacturing for $100 worth of product, which is $2.37 above average. Producers will close half the profitability gap by the end of the 2003. The supplier's best argument may be that a chemicals-driven cost increase of 8.3% between February '02 and May '03 was not redressed and led to a near-record low level of manufacturing-related margins.

The fabricated plate work industry also has an F grade. An analysis of margins suggests that suppliers have the cost justification for increasing prices by 1.4%. U.S. demand for metal plate work will see a dramatic improvement in 2004 as end-markets growth hits a year-over-year rate of 6.1% in 2004:Q3. Stronger end-markets won't translate into stronger price hikes. Over the last few years, we've seen a disconnect between demand and prices thanks to competition from foreign suppliers. Tags for fabricated plate work will edge ahead 0.8% in 2004.

Ball and roller bearings manufacturers have done a better job stemming margin losses, as evidenced by their average C margin grade. In July 2003, the cost of making a unit of output in SIC 3562 fell 0.6% with the bulk of the decline due to a 1.5% drop in wage rates paid to factory workers. Producers generated additional savings from U.S.-made steel inputs. Cost savings did not translate into lower output prices in July. Indeed, buyers won't see any price relief ahead. A battle between prices and costs will rage in the U.S. bearings industry. From 2003:Q4 to 2004:Q4 industry tags will rise 1.7% while costs will grow 1.3%.

Price/cost/demand roundup

Average Product Prices Direct Mfg. Costs Growth in U.S. End Markets
NC means data could not be computed.

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.

All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-452-6159; e-mail:
IndustrySICApril 03July 03Costs are...GradeApril 03July 03
Wood Pallets and Skids2448-0.970.48risingF--0.25-0.31
Polishes and Sanitation Goods2842-0.230.15stableF0.340.28
Surface Active Agents2843-1.05-0.26stableF0.640.23
Adhesives and Sealants28910.020.08fallingF2.231.34
Lubricating Oils and Greases29920.931.59stableA0.270.18
Rubber and Plastics Hose and Belting30520.831.66stableD1.831.46
Abrasive Products32910.060.40stableD3.153.43
Steel Wire and Related Products33151.211.45stableD-1.85-1.03
Copper Rolling and Drawing3351-2.23-2.28risingF-2.04-1.81
Nonferrous Wire Drawing and Insulating3357-3.48-2.17stableF5.015.68
Heating Equipment, except Electric34330.811.07stableC-1.62-0.82
Fabricated Plate Work, Boiler Shops34431.130.99stableF-3.15-2.05
Bolts, Nuts, Rivets and Washers34520.140.11stableF5.666.10
Industrial Valves34911.311.38stableA-2.07-1.59
Fluid Power Valves and Hose Fittings34921.081.16stableB-2.07-1.59
Other Valves and Pipe Fittings34940.761.71stableC-2.07-1.59
Miscellaneous Fabricated Wire Products3496-0.17-0.24stableF-0.29-0.09
Fabricated Pipe and Fittings34980.380.87stableD-2.07-1.59
Ball and Roller Bearings35620.871.07fallingC0.410.48

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