Purchasing Hotline

By Staff -- Purchasing, 4/5/2001

• Amid the surfeit of economic gloominess, there remain glimmers of hope for a V-shaped recovery starting by summer. The latest: PURCHASING 's diffusion index tracking buyers' inventory strategy for manufacturing materials has risen for two consecutive months, gaining a total of four and half points since January. This follows a 15.5-point six-month slide that started last July and suggests that manufacturing's inventory drawdown is nearing an end. PURCHASING 's new order index shows a similar two-month rally, gaining seven points between January and March, after a 26.5-point plunge that commenced last June.

• Unemployment remains at just 4.2%, but manufacturing has lost nearly 400,000 jobs since last summer. In a recent statement to Congress, Bureau of Labor Statistics (BLS) commissioner Katharine Abraham, noted that between June 2000 and February 2001, manufacturing lost 371,000 jobs. The auto industry alone eliminated 77,000 jobs since June. Average factory workweek has fallen a full hour since then and overtime has declined by almost as much. What's more, Abraham said job weakness in manufacturing was bleeding to other sectors, citing a loss of 22,000 wholesale trading jobs since November and a loss of 200,000 jobs in help supply services (dominated by temporary-help firms that provide workers to manufacturing as well as other industries) since April.

• Sales prices for benchmark northern bleached softwood kraft (NBSK) pulp have declined $30/metric ton to $650 because of weak demand and bloated supplies. Many paper mills, still facing low selling prices and weak overall demand, are reluctant to buy more than the minimum pulp quantities they may need, according to buyers. North American prices for other grades have dropped as well: southern bleached softwood kraft (SBSK) tumbled $40/metric ton to $600-$610; northern bleached hardwood kraft (NBHK) fell $30/metric ton to $590-$610; southern bleached hardwood kraft (SBHK) fell $30/metric ton to $580-$590.

• Boeing boosted jetliner prices by 5.7% for 2001 while its chief competitor Airbus Industrie, the European consortium, raised prices 5.5%. Both firms blame higher energy costs for annual price increases exceeding the typical 3%. With this year's pricing, Boeing's 777 models list from $201.5 million-$231.5 million while 747 models range from $194 million-$215 million.

• Nickel averaged $3.02/lb through mid-March on the London Metals Exchange (LME), down from $3.92 for all of 2000. Reason: Demand growth is down and expected to slow to 3.8% in 2001 after two consecutive years at 5%, says Joseph Laezza, marketing VP at Falconbridge. "After two excellent years of demand growth, we expect sales to come off slightly in 2001 because of slippage in global stainless steelmaking," he says.

• Price-hike efforts by cold-finished steel bar makers are floundering. Buyer surveys place March spot tags at $420/ton, despite mill efforts to boost them to $450. Grade-1018 carbon cold-finished bars slipped from $430 in February. According to an informal survey of market sources, mill prices for cold-finished bar products to service centers were down 8%-10% in first quarter 2001 compared to fourth quarter 2000.

• Copper traders on the London Metals Exchange (LME) are pessimistic about a price rebound. LME copper averaged 81¢/lb through mid-March, compared with 82¢for all of 2000. Traders say cathode buying among OEMs and processors has retrenched somewhat in the second quarter and that premiums for U.S. buyers softened to 2.5¢/lb over LME from 2.8¢at the start of February.

• Major U.S. and Japanese titanium alloy producers have boosted April prices by an average 10%, citing greater demand and higher costs. Growing demand for the high-strength, lightweight metal, especially from makers of aerospace products and energy machinery, has resulted in capacity constraints and extended leadtimes.

• A collapse in second half 2000 dropped annual sales of recreation vehicles by 6.6% to 300,100 units from 321,200 units in 1999. Still, 2000 was the second-best sales year in two decades. Sales declines are expected this year for motor homes, travel trailers, fifth-wheel trailers, truck campers and folding camping trailers. Claire C. Skinner, CEO of Elkhart, Ind.-based Coachmen Industries, says key assumptions call for a 17.9% drop in motor home shipments and a 9.4% decline in towable RV sales.

• The problem for steelmakers is not demand. Rather, it's excessive production. Lost in the hubbub over the recent collapse in steel spot-market prices is the fact that U.S. demand for steel rose almost 3.5% to 114 million net tons in 2000-the highest chew up since the Vietnam War era. However, steel supply last year was a record 132.4 million tons. Even if, as expected, steel demand drops 8% to 105 million tons in 2001, it will still represent a sixth consecutive year in which steel use exceeds 100 million tons.