Trouble for wood buyers

Plant engineers may have noticed that their budget for wood products isn't buying as much as it used to. A trade dispute between the U.S. and Canada has tightened supplies of lumber. As a result, prices for some lumber products popped in May 2001. For example, compared to a year earlier, prices for southern CDX interior sheathing jumped 19.


Plant engineers may have noticed that their budget for wood products isn't buying as much as it used to. A trade dispute between the U.S. and Canada has tightened supplies of lumber. As a result, prices for some lumber products popped in May 2001. For example, compared to a year earlier, prices for southern CDX interior sheathing jumped 19.9% while light framing pine lumber prices also increased 17.8% and tags for western hemlock lumber surged 16.9%.

This inflationary environment helped the softwood plywood (SIC 2436) industry to pull off the greatest bottom-line victory. Here, average prices in May 2001 increased 19.1% from April and 9% from a year ago. Factory buyers, however, may find May's price hike was an aberration that will not lead to future price concessions, for during the entire 12-month period ending May 2001, average softwood plywood prices actually fell 17.5%.

The slowdown in demand that we commented on three months ago has become considerably more noticeable. Again, end-markets for all the industries in our construction and maintenance supplies group continued slowing from a quarter ago. Now four industries have actually seen their end-markets decline. However, manufactures of flat glass, sheet metal work and wiring devices continue to enjoy double-digit end-market growth, so factory managers who buy these supplies had better stay on their toes.

Price/cost/demand roundup

Average Product Prices1Change, %, During 12-Mo Ending...Direct Mfg. Costs2and Margins GradeGrowth in U.S. End Markets3Change, %, During 12-Mo Ending...
IndustrySICFeb 01May 01Costs are...GradeFeb 01May 01
1Average 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.
2Analyses 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.
3Growth 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:
General sawmills and planing mills2421-8.38-9.61RisingB0.05-1.24
Hardwood veneer and plywood24351.491.19RisingB1.810.63
Softwood veneer and plywood2436-17.70-17.47RisingB1.810.63
Metal partitions and fixtures25420.680.63StableB3.512.11
Paints and allied products28512.162.19FallingC1.18-0.87
Flat glass32111.181.13RisingF-27.9522.36
Other structural clay products32595.596.43StableA4.293.42
Gypsum products3275-11.49-20.74StableF-0.74-0.08
Mineral wool3296-3.02-3.72StableD2.511.41
Steel pipe and tubes33173.932.26StableA4.331.18
Plumbing fittings and brass goods34322.211.40StableC3.462.58
Metal doors, sash, and trim34421.821.59StableC3.112.27
Sheet metal work34441.241.06StableB23.9019.43
Refrigeration and heating equipment3585-0.18-0.23StableF-1.34-4.08
Current-carrying wiring devices3643-0.65-0.65StableF20.4517.11
Noncurrent-carrying wiring devices36440.810.92FallingC20.4517.11
Commercial lighting fixtures36460.370.63StableF4.102.94
Environmental controls38220.270.36StableD2.490.83

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