It's hard to find things to complain about
By Staff -- Purchasing, 4/9/1998
"There have been no unexpected price increases nor large percentage price increases. Maybe our industry is becoming so competitive that suppliers have to be wary about overcharging. Anyway, business is generally good and I can't find much about which to complain."Purchasing manager Ray Dobrowsky of Tam-co Inc., a maker of forged tools near Pittsburgh, is typical of the buyers in Purchasing's recent grass roots survey. Business is good and most are ill disposed to do any deep worrying.
Those who are inclined to worry see signs that business will be a little less robust this year than in 1997. A fair number expect business volume to tail off in the second half of the year. Some cite weaker order books, others note that suppliers have been very cautious about raising prices. The biggest worry, though, is a vague edginess about economic problems in the Far East.
Here's a look at changes in buying conditions as reported by Purchasing's grass roots field editors around the country:
* Prices. Few unexpected increases. Some heat developing in packaging, but buyers differ widely on its importance. While steel demand remains strong, buyers say prices show little tendency to move. Story is similar for aluminum. Copper prices continue to sag and buyers talk more openly of weakness in organic chemicals.
* Leadtimes. Slight leadtime lengthening for a number of commodity items--especially commodity metals products. Most buyers see this as an early-year blip and expect second-quarter corrections. Midwest and Southwest buyers report some spot shortages on structural steel products.
* Inventories. A growing number of buyers report that while inventories are generally holding firm, they are being forced to carry more non-stock items. Many say the problem has existed for some time, but has become more pronounced in the current vigorous business climate.
* Deliveries. Problems in fourth-quarter 1997 (resulting from UP's rail merger difficulties) seem to be well on the way to resolution. Delivery problems from warehouses and service centers--which had escalated a bit in the fall--also seem to be fading.
* Imports. A growing number of buyers report proliferation of unsolicited bids from off-shore suppliers. Betting is on a sharp upturn in imports of metals, paper, and chemicals in the second quarter.
* Quality. Quality problems reported in third- and fourth-quarter '97 seem to have run their course.
Here are the details by region:
East Coast
Imports are expected to exert some downward pressure on prices in the second quarter, but, so far, they've been quiet. Corrugated suppliers talk of a possible 8%-12% price hike. Truckload-services spot shortages have dissipated.
Mid-Atlantic
Buyers in the area report oversupply of Western species of pine and fir that is being diverted from export trade to the Far East. Buyers report scattered price reductions on switchgear (10% or more), transformers (5%-10%), refractory brick (12%). PC prices are dropping like stones. Higher tags on stainless products (2%-4%), titanium (about 7%). More paper price increases expected soon. Structural steel leads are moving out (running currently from a low of 15 weeks to a high of 28 weeks).
Midwest
Lower prices reported on scrap copper (down to 76(cent)/lb from $1.10) and brass scrap (down to 58(cent)/lb from 72(cent)). Scrap aluminum is down about 4(cent)/lb. Ferrous scrap remains relatively strong. Extended leadtimes on aluminum plate items--especially heat-treated (typical lead for heat-treated is 26-35 weeks). Slight leadtime increases on metal stampings and metal fabrications.
South
Sheet steel leads are out a bit (to 6 weeks from 4 last fall). Leadtimes on major rotating equipment are stretched out as far as 20 weeks. Slight leadtime tightness on some sizes of bearings. Some leadtime tightening also reported on ferro vanadium. Caustic soda prices (at around $310/dry ton) are down to their lowest point in almost three years. Nickel prices started dropping around the first of the year and continue their downward trend.
Southwest
Structural steel products (especially wide-flange beams) are pricey and scarce. Mills raised prices by $10/ton twice in two months. Lumber is a different matter. Prices have dropped 5%-8% over the past couple of months. No problems with availability.
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