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Inflation Woes to Get Worse

June 8th, 2007 · by Tim Minahan · 2 Comments · costing, supply market dynamics, supply risk

A Wall Street Journal cover story earlier this week warned of inflationary indicators around the globe, including near-capacity production operations in Europe and double-digit wage increases among both laborers and service providers in China and India. The article quotes former IMF Chief Economist summing the current supply market situation this way, “Markets have gotten used to the idea that the global economy will keep producing downward pressure on prices. But that phase may be ending.”

This sentiment is corroborated by the latest Industry Cost Escalation (ICE) Alert from Thinking Cap Solutions, which projects 5% to 10% price increases across 93 commodities. Elizabeth Baatz, editor of the monthly report on commodity availability and pricing trends, offers the below insights into where you can expect to see supply costs rise:

Buyers of industrial components and products will be facing more price increases across a wider swath of industries than ever now. Purchasers of carbon black, particleboard, steel wire, petrochemicals and metal pipe fittings will be negotiating with suppliers in industries which are under pressure to raise average prices by between 13.9% and 10.7%. That’s how much prices must be increased if manufacturers are to achieve the same level of margins that were held a year ago. Underlying manufacturing costs have escalated faster than prices charged by producers for final products. Thinking Cap Solutions’ latest ICE-Alert report identifies a total of 93 industries where average product prices must be raised by at least 5% in order to restore margins to the average levels held over the past five years. From the May ICE-Alert, the table below shows the Top 20 manufacturing industries which need even larger price hikes in order to match the average margin conditions that were held exactly one year ago.

TOP 20 NEGOTIATION HAZARD INDUSTRIES
To restore margins to year-ago or five-year average levels, industry product prices must increase by how much on average

NAICS

INDUSTRY

Yea-ago

5-yea avg.

325182

Cabon black manufactuing

13.93%

2.55%

321219

Paticleboad & elated poduct mfg.

12.84%

8.22%

331222

Steel wie dawing

11.77%

10.53%

325110

Ethylene, benzene & petochemicals

11.16%

6.33%

332996

Fabicated metal pipe & fitting mfg.

10.68%

8.94%

331210

Ion & steel pipe & tube mfg.

10.66%

5.69%

326122

Plastics pipe & pipe fitting mfg.

9.90%

-11.58%

332114

Custom oll fomed metal pod. mfg.

9.56%

11.76%

327420

Gypsum poduct manufactuing

9.36%

-6.85%

322122

Newspint mills

9.34%

6.11%

332611

Heavy-gauge metal sping mfg.

9.10%

8.78%

332115

Metal cown & closue manufactuing

7.90%

4.79%

326220

Rubbe & plastics hoses & belting

7.64%

4.71%

331221

Rolled steel sheet, ba & shapes mfg.

7.54%

6.67%

321113

Sawmills

7.51%

2.52%

333515

Cutting tool & machine tool accessoy

7.39%

9.46%

333412

Industial & commecial fan & blowe

7.22%

4.24%

331423

Seconday coppe smelting & alloying

7.08%

-8.43%

331319

Othe aluminum olling & dawing

6.90%

13.27%

333511

Industial molds (casting & foming)

6.82%

4.93%


Source: ICE-Alert For more information, call 360-452-6159

For more information about the ICE-Alert or the Top Negotiation Hazard Industries, contact Elizabeth Baatz at ebaatz@ice-alert.com or call Thinking Cap Solutions in Washington state (tel: 360-452-6159).


Also, check out previous ICE-Alert projections here.

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2 responses so far ↓

  • 1 Supply Excellence » Is Detroit the Next Global Sourcing Hot Spot? // Jun 13, 2007 at 8:34 am

    [...] Inflation Woes to Get Worse June 12, 2007 Is Detroit the Next Global Sourcing Hot Spot? by Tim Minahan at 8:01am [...]

  • 2 Supply Excellence » Bull Scrap // Jul 10, 2007 at 8:55 am

    [...] These findings corroborate earlier predictions reported here from the Industry Cost Escalation (ICE) Alert from Thinking Cap Solutions warning buyers to watch for rising prices for products that include carbon black (up nearly 14% from year-ago levels), steel wire (up 11.77%), fabricated metal pipe and fittings (up 10.68%) and ion and steel pipe and tubes (up 10.66%). The increases reflect how much prices must be raised if manufacturers are to achieve the same level of margins that were held a year ago. [...]

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