Demand is flat, but upswing is in sight
By Kathryn Belyea -- Purchasing, 1/13/2000
Stability is the word that best describes current conditions in the bearings market. Prices and demand are flat, and there's little change in leadtimes. Automotive demand has been up in 1999 but will flatten in 2000.However, the global bearings market appears poised to grow this year as foreign economies recover. Overseas markets may boost demand as much as 7% in the coming year, which increases the chance that prices will rise.
Bearings producers generally agree with this market assessment. According to David Gridley, executive director, marketing services for Torrington in Torrington, Conn., the market is pretty much on an even keel. Torrington announced in late 1999 a 3%-5% price increase in OEM and aftermarket prices for select product groups. In relation to supply, says Gridley, "delivery is good, with no major product lines with extended leadtimes."
Steve Feketa, director of Thomson's linear bearings strategic business unit in Port Washington, N.Y., says prices for linear bearings will be stable through 2000. "The general market for linear bearings," he adds, "largely sold through distribution, has been stable to showing a slight increase. In the OEM market place it's very competitive and this has trended prices downward."
Labor costs increasing
In both August and September 1999, according to Thinking Cap Solutions (a company that specializes in industry cost escalation analysis), bearings suppliers raised the price of the "average industry product" 0.06%. This offset to some extent an increase in manufacturing costs due largely to rising labor costs. The cost-analysis firm's October market report says that in the six months prior to the report, wages paid to production workers went up 4.61%. Even so, the report continues, from a "long-run" perspective, margins are still "above their five-year norm."
Labor costs, however, will continue to present a challenge for producers, according to Jack Pangrazio, vice president of marketing at NTN Bearing Corporation in Mount Prospect, Ill., since engineering support is being pushed down the supply chain by OEMs. "Automotive is doing less engineering work than 10-15 years ago," he explains, "and is asking suppliers to fill that void. So we are adding more and more engineering support to support the same volume in sales."
Overall demand is flat, but future looks bright
Gridley characterizes demand for bearings as "flat overall," but Torrington, he says, is "starting to see some encouraging signs of a possible improvement." Demand for bearings is strong in relation to automotive and consumer items, but soft in agricultural and construction equipment, steel and paper, he reports.
Pangrazio also sees lower demand levels in agricultural and construction because those markets are down, but says that the common 6200 bearings are "stretched pretty tight." In 2000 he does not expect demand will exceed supply for the 6200 due in large measure to global capacity. There may be "occasional blips," he says, but shortages will not be ongoing.
In a recent report, Freedonia, a market research firm based in Cleveland, forecasts that "the world market for anti-friction bearing products is projected to increase nearly 7% per year through 2003 to over $40 billion, an improvement over the mid/latter 1990s performance." The report attributes this sustained demand to a "brightening economic outlook" and the "global financial crisis" having "passed its most critical point." Industrialization in developing countries will contribute to this increased demand, with its sizable bearing aftermarket requirements for industrial machinery.
On the automotive side, Freedonia predicts that "demand will be adversely impacted by rather sluggish growth in world motor vehicle production going into the early years of the new century."
Rick Nielson, marketing manager at FAG Automotive sees automotive demand "flattening out" in 2000 after a record year with over 17 million vehicles sold. This has been the "best year in almost 15 years," he says, but the market can't sustain that level. Next year will probably see around 16 million vehicles being produced.
In light of the strong economy, Pangrazio at NTN doesn't see leadtimes "getting dramatically shorter." The strong economy has been sustaining demand for a long time, he says, and this is "stretching the entire supply chain."
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