Rate of expansion will roll more slowly this year

By By Elena Epatko Murphy -- Purchasing, 4/5/2001

The rate of growth for power transmission products is slowing this year, a pace that will continue for the rest of 2001. With automotive and electronics demand down, supply of power transmission (PT) products is up. Prices are either down or only slightly higher than last year.

Tim Murphy, manager, industrial belt marketing, Gates Rubber Co., Denver, Colo., says there is a "very slight slope of growth," though demand is definitely lower than last year. PT product sourcing often mirrors capital equipment expenditures, which usually occur in the first quarter. As a result, the weaker level of demand early this year was an indication there would be less expansion throughout 2001.

Signs that PT demand would grow more slowly this year appeared last summer. Mary Sue Lyon, executive vice president, Power Transmission Distributors Association (PTDA), Chicago, Ill., says, "Business for both our manufacturer and distributor members in the U.S. started to trend downward last July." Distributors' sales in 2000 ended 6.4% higher than in 1999, according to PTDA 's research. However, Lyon points out that an earlier and higher "increase kept diminishing as the year progressed." PTDA reports manufacturers' "sales across all categories of power transmission/motion control products for 2000 also grew at a rate of 6.4% over 1999."

Lyon characterizes current demand for PT products as "soft." David Mayer, vice president-marketing, Kaman Industrial Technologies, Windsor, Conn., says that the slowdown that began in the fourth quarter has had a widespread effect. He notes, "The slowdown began within major processing industries such as automotive and steel and has impacted related supporting industries."

Electronics is one industry that drove demand in 2000. Jeffrey Davies, senior vice president, sales and marketing, Thomson Industries, Port Washington, N.Y., says semiconductor orders increased demand for some PT product groups last year. Like other industries, electronics slowed in December. One reason for fewer electronics orders, says Gene Anderson, director-distribution sales and marketing for Thomson Industries, is that cell phone demand is growing more moderately after a period of rapid expansion.

Despite lackluster expectations for growth, there are some markets that are showing strength. Davies says the Asian market continues to be healthy as it recovers from the recession of a few years ago. Anderson points to the medical market as still active. Bill Purser, president and chief operating officer at Applied Industrial Technologies, says that interest rates that "stimulate the economy" will have an "indirect impact on power transmission products."

Prices increase modestly

Prices will increase only modestly this year as PT customers continue to correct inventories that are still high. Producers, however, say they are experiencing pressure from their supply chain to raise tags. As a result, buyers can expect minimal increases this year among most PT products.

One supplier says his company is raising prices 3% this year. The increase reflects price increases in the PT supply chain, some of which were expected and others that are new and will affect much of the industry. This industry source says that passing along increases on steel is common. However, a double-digit jump in a material used in belts is less likely to be absorbed by the marketplace. PTDA 's Mary Sue Lyon says energy costs also are causing concerns among power transmission product manufacturers.

Davies says there will be "small to midsize increases" in price this year. However, even PT products in high demand last year will not generate significant spikes in tags. For instance, suppliers don't expect high increases for ball screws, which were scarce last year.