Metal prices drop

Basic metal prices fell sharply in 2001. For example, average wholesale prices for U.S.-made steel fell 6.5%, U.S. copper tags declined 16% and domestic aluminum prices dropped 12.6%. But have plant engineers who buy metal products seen any of the deflation benefit? Not enough of it, for while materials costs have been falling, downstream metal producers have managed to pass along only a small portion of the savings to buyers.

Deflation trends in primary metals instead have been used to boost fabricated metal margins. Looking at the Plant Engineering price/cost table we see that makers of metal doors and trim have been the most aggressive deflation opportunists. Thanks to a 3.2% decline in the industry’s materials costs, the cost to manufacture metal doors dropped 1.7% between November 2000 and November 2001. But average prices that plant engineers and everyone else paid for metal doors rose 1.3%. As a result, SIC 3442 enjoys a margin grade of A.

The sheet metal work industry (SIC 3444) has also kept a large portion of their metals cost savings from buyers. Here direct manufacturing costs declined 2.3% between November 2000 and November 2001. Buyers of sheet metal work can construct good arguments to capture more cost savings by focusing on the cost of raw materials. We saw per-unit cost declines of 17.4% for stainless steel sheet and strip, 8.1% for carbon steel sheet and strip, and 3.5% for aluminum sheet and plate.

Forecasts from Thinking Cap Solutions suggest such strong deflationary trends will help keep the lid of prices in 2002. Average sheet metal work prices are predicted to rise just 0.5% in 2002.

Price/cost/demand roundup

Industry
SIC
Average Product Prices
Average Product Prices
Direct Mfg. Costs
Direct Mfg. Costs
Growth in U.S. End Markets
Growth in U.S. End Markets

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.

General Sawmills and Planing Mills
2421
-6.67
-4.86
stable
F
-1.59
-2.02

Millwork
2431
1.31
1.86
falling
A+
2.63
1.72

Hardwood Veneer and Plywood
2435
0.84
0.20
falling
A
-0.38
-1.27

Softwood Veneer and Plywood
2436
-6.45
-3.61
stable
D
-0.38
-1.27

Metal Partitions and Fixtures
2542
0.98
0.79
stable
B
1.63
0.55

Paints and Allied Products
2851
2.37
2.40
falling
A
-1.98
-2.60

Flat Glass
3211
0.99
0.69
stable
F
5.56
-2.14

Other Structural Clay Products
3259
6.96
7.27
rising
A
3.21
2.10

Gypsum Products
3275
-25.86
-24.43
stable
D
-0.38
-0.54

Mineral Wool
3296
-3.15
-1.03
stable
C
1.05
0.42

Steel Pipe and Tubes
3317
-0.10
-2.10
stable
B
-2.22
-4.93

Plumbing Fittings and Brass Goods
3432
0.15
-0.83
stable
B
2.41
1.50

Metal Doors, Sash and Trim
3442
1.41
1.27
stable
A
2.10
1.33

Sheet Metal Work
3444
0.63
0.02
stable
B
6.32
-0.37

Refrigeration and Heating Equipment
3585
-0.22
-0.05
stable
D
-3.98
-3.41

Current-Carrying Wiring Devices
3643
-0.78
-0.62
stable
F
6.62
0.71

Noncurrent-Carrying Wiring Devices
3644
1.54
2.10
stable
A
6.62
0.71

Commercial Lighting Fixtures
3646
0.17
-0.14
stable
D
1.33
0.17

Environmental Controls
3822
0.26
0.13
stable
D
0.89
0.61

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