PURCHASING HOTLINE

By Staff -- Purchasing, 3/8/2001

• Economists continue to hack away at their macro forecasts for 2001. A February consensus report from Blue Chip Economic Indicators places the 2001 real GDP growth forecast at just 2.1% down from 2.6% in January and a high of 3.5% last September-August. Blue Chip emphasizes, however, that "the consensus continues to predict the bulk of this year's weakness will be concentrated in the first half and that real GDP growth will rebound back above the 3% level in the final six months of the year."

• A consensus of Federal Reserve Board governors and bank presidents places real GDP growth between 2%-2.5% in 2001, according to recent Congressional testimony by Federal Reserve chairman Alan Green-span. While noting this implies a "substantial slowdown" Greenspan said the group foresees "an implicit strengthening of activity after the current rebalancing is over." Smart money says Green-span left open the door to more interest rate cuts, but they'll probably be less dramatic than the two 50 basis point cuts made in January.

• Nucor will attempt to increase market prices on hot-rolled sheet by $20/ton effective with March shipments, a move that undercuts recent $40/ton hikes proposed by U.S. Steel Group, Bethlehem Steel, Stelco, Wheeling-Pittsburgh Steel and Ispat Inland, and $30 by Trico. "We don't see the market supporting more than $20," says Daniel DiMicco, Nucor's president. "And we don't see the market allowing an increase on cold-rolled or coated sheet at all," he says, rejecting the $30/ton hike proposed by integrated mills. Note: Buyer surveys suggest none of the price increases will stick.

• Aluminum mills want to raise prices on soft alloy extrusions by 5¢/lb, but buyers are resisting. Mills announced price hikes totaling 22¢/lb on soft alloy extrusions during 2000, of which maybe half stuck since industry bookings slipped badly in the second half and prices collapsed in the fourth quarter. For the year, bookings fell 11% from 1999. London-based CRU International says poor demand in the U.S. will make extrusion price increases difficult.

• Machine tool demand for 2000 totaled $6.64 billion (29,009 units), 0.8% higher than in 1999. The outlook for 2001 is uncertain because many manufacturers bought efficient equipment during the economic expansion of the 1990s. Greg Safko, senior director at the American Machine Tool Distributors' Association, says a decade's worth of new machines that produce more goods, coupled with a slowdown in the economy, has caused businesses to delay additional purchases.

• BP Amoco settled a federal clean-air lawsuit, agreeing to spend $650 million on equipment that will reduce nitrogen oxide and sulfur dioxide emissions at eight domestic oil refineries. Environmentalists hailed the agreement, which will cut production of pollutants that are major contributors to ground-level ozone, or smog.

• The slowing economy has weakened demand for aluminum sheet products. Aluminum sheet operations are running at reduced capacity, various mills report, because of reduced demand from such key markets as distribution, automotive and truck trailer manufacturing, and construction. Although domestic mill shipments of aluminum products rose slightly in 2000, sheet shipments actually slipped and the mavens expect U.S. demand to continue softening well into first half 2001.

• In dismissing a $100 million class-action lawsuit against eBay Inc., a San Diego judge has reaffirmed "buyer beware" for users of e-commerce Web sites. Judge Linda Quinn ruled that the online auction company cannot be held liable for others' dishonesty. San Jose-based eBay didn't vouch for the authenticity of sports memorabilia on the site, but rather allowed sellers to describe the merchandise themselves.

• American motorists used 1% less gasoline last year than they did in 1999, representing the first demand decline in nine years, according to the American Petroleum Institute. Reason: Higher prices. For most of the 1990s, gas use grew by an average 1.5%/year.

• California's energy crisis has yet to cause a mass exodus of businesses, but the Silicon Valley Manufacturing Group has warned state lawmakers that reliable power is crucial to their future plans. Deregulation has led to scarce supplies and high prices for power in California. State regulators were forced in January to approve rolling blackouts to conserve power. Most businesses that rely on electricity for manufacturing and other critical systems have backup generators that switch on instantly after power is disrupted, says Michelle Montague-Bruno of the Silicon Valley Manufacturing Group, but this increases production costs.

• The nation's second-largest truck leasing and rental company will acquire the third largest in a deal creating a $3.4 billion company. Penske Truck Leasing Co. of Reading, Pa., is buying Rollins Truck Leasing Corp. of Wilmington, Del. Penske operates more than 152,000 trucks and serves customers from 750 locations in the U.S., Canada, Mexico, South America and Europe. Rollins services more than 53,000 vehicles from 270 locations in the U.S. and Canada.

• PolyOne Corp. of Cleveland is realigning its plastics resins distribution business by focusing on four regional service centers in Massillon, Ohio, Ayer, Mass., Lemont, Ill., and Rancho Cucamonga, Calif. Later, the company plans to open a warehouse in the Detroit area, expand one in Dallas, and may build new sites in the Southeast, the Mid-Atlantic and Canada.