Inflation expected for operating materials and supplies

Plant engineers can expect a steady dose of inflation for operating materials and supplies in 2003. Upward price pressures are strong for 13 industries. The key to the price outlook lies in our understanding of the underlying cost and margin challenges that manufacturers face. In 2003, the PLANT ENGINEERING operating materials and supplies price index rose 1.

04/08/2004


Plant engineers can expect a steady dose of inflation for operating materials and supplies in 2003. Upward price pressures are strong for 13 industries.

The key to the price outlook lies in our understanding of the underlying cost and margin challenges that manufacturers face. In 2003, the PLANT ENGINEERING operating materials and supplies price index rose 1.1%, but manufacturing costs grew 3.4%. The result of a persistent price/cost escalation mismatch has been to bring margins down into dangerous territory. Indeed, analysis of manufacturing-related margins shows four industries sporting record F-minus grades and nine others with an F.

Consider the case of the drawn and rolled copper products (SIC 3351). Here we see an industry that has been hammered by hikes in materials costs as well as energy prices. Domestic materials for this industry jumped 6.85% in 2003, while costs for imports increased an even faster 7.99%.

Meanwhile, energy costs for manufacturing of all products grew in most cases by double digits. Fabricators of copper products as well as steel plate work suffered the most in 2003 as energy costs for these two industries soared 11.63% and 12.06%, respectively. The only industries to be hurt even more by high energy costs were in the chemicals sector. Here we see that energy cost inflation hit 17.24% for makers of surface active agents.

The price forecasts shown here were calculated in November 2003, before the fourth-quarter data were complete. Manufacturer prices generally are tending to outstrip our forecasts, so expect upward revisions ahead. In future columns we will explore the 2004 and 2005 outlook for underlying costs as well as producer prices, but we will be shifting from SIC to NAICS codes.

Price/cost/demand roundup

Major Components of Manufacturing Costs Average Product Prices
Annual % Change in 2003 Annual % Change
Industry SIC Domestic materials Imported materials Production labor Energy 2003 Forecast 2004
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: ebaatz@ice-alert.com).
Wood Pallets and Skids24483.626.713.0610.542.48na
Polishes and Sanitation Goods28423.980.972.7511.810.680.80
Surface Active Agents28435.112.112.7517.241.141.15
Adhesives and Sealants28916.332.992.1511.950.781.06
Lubricating Oils and Greases29923.451.520.7915.453.212.40
Rubber and Plastics Hose and Belting30522.862.042.6712.142.231.25
Abrasive Products32912.842.364.577.350.280.70
Steel Wire and Related Products33152.642.162.7110.722.240.50
Copper Rolling and Drawing33516.857.990.4211.631.981.60
Nonferrous Wire Drawing and Insulating33574.315.700.878.260.461.00
Heating Equipment, except Electric34331.392.663.0910.391.691.00
Fabricated Plate Work, Boiler Shops34431.723.634.9412.060.220.75
Bolts, Nuts, Rivets and Washers34521.583.882.1410.160.160.45
Industrial Valves34911.523.441.947.571.351.60
Fluid Power Valves and Hose Fittings34921.543.442.116.821.351.80
Other Valves and Pipe Fittings34941.933.682.8410.912.701.40
Miscellaneous Fabricated Wire Products34960.941.792.0010.31-0.100.40
Fabricated Pipe and Fittings34981.403.442.0010.541.051.10
Ball and Roller Bearings35621.191.732.719.880.981.20





The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
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.
Pipe fabrication and IIoT; 2017 Product of the Year finalists
The future of electrical safety; Four keys to RPM success; Picking the right weld fume option
A new approach to the Skills Gap; Community colleges may hold the key for manufacturing; 2017 Engineering Leaders Under 40
Control room technology innovation; Practical approaches to corrosion protection; Pipeline regulator revises quality programs
The cloud, mobility, and remote operations; SCADA and contextual mobility; Custom UPS empowering a secure pipeline
Infrastructure for natural gas expansion; Artificial lift methods; Disruptive technology and fugitive gas emissions
Power system design for high-performance buildings; mitigating arc flash hazards
VFDs improving motion control applications; Powering automation and IIoT wirelessly; Connecting the dots
Natural gas engines; New applications for fuel cells; Large engines become more efficient; Extending boiler life

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

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
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 Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
This digital report explains how plant engineers and subject matter experts (SME) need support for time series data and its many challenges.
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Maintenance Manager; California Oils Corp.
Associate, Electrical Engineering; Wood Harbinger
Control Systems Engineer; Robert Bosch Corp.
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me