Orders for motors and drives are escalating slightly after demand lapsed late last year. However, prices will not rise as demand is just beginning to recover. Supply of motors is adequate, and drives are available even more readily.

There has been a "slight softening in business," says John Wolfe, sales and marketing manager, Pittsman, Harleysville, Pa. Industrywide, demand was weak through much of the first quarter of 2001. For instance, the semiconductor industry's orders stopped climbing at the rapid rate set the previous year, according to Wolfe.

Dick Schul, group vice president, Emerson Motors, St. Louis, Mo., says that several markets, such as agriculture, food processing, and tools, currently are experiencing a lull in demand, with no significant changes expected in the second half of the year. Jerry Peerbolte, vice president, marketing, Baldor Electric, Fort Smith, Ark., points out, "Capital spending on new machinery and equipment has been noticeably slower since the fall of 2000."

While overall demand is soft, there are some markets that are expanding. Jean-Paul Montupet, executive vice president, Emerson Industrial Automation, says that oil, gas and chemical processing industries are gaining momentum after slowing for several months.

There are also a number of factors that are flattening orders for motors and drives. For instance, in HVAC (heating, ventilation and air conditioning), commercial demand is strong, while residential demand is down, says Gary Wolfe, marketing manager, integral motors, A.O. Smith, Milwaukee, Wis.

In addition, Emerson's Schul says need for heating products was suppressed during the unusually warm winter in 1999-2000. Air-moving fractional horsepower (fhp) motors demand fell as a result. However, this past year's colder winter reversed the sluggish conditions for this segment of motors, and Schul expects an upswing in orders for air conditioning motors this summer.

Overall steady demand for motors and drives will limit the effect of price hikes. Though industrywide increases have been issued in response to rising materials costs, pricing will continue to be flat due to competition among suppliers.

Buyers started seeing industrywide price increases ranging from 3%-5% for motors and drives in the first quarter, says Peerbolte. Schul notes, "For the first time in awhile there is price appreciation" for motors. He says increases are between 2%-3%, and attributes higher prices to escalating costs for copper and steel, as well as transportation and energy.

Though motors suppliers are nudging tags upward, they are experiencing resistance. One industry source notes long-term contracts are more competitive. Also, consolidation in a number of markets, including the service industry, is yielding a customer base that uses its leverage to lower prices.

Adding to the tight margins in the motors and drives industry are the costs for components. For instance, last year, resistors and capacitors were on allocation. Resellers often tripled prices, increasing production costs for motor suppliers, says one source.

Schul says leadtimes for motors are between 10 days and six weeks. Highly engineered product is being delivered between eight and 14 weeks. Currently, 15% of Emerson's integral motor sales are completed on its Internet site, which has reduced leadtimes and enabled the company to plan capacity use more effectively.

On the supply side, shortages are easing. For instance, John Wolfe at Pittman says a number of electronic components are more available during this quarter and supply lines will open further during the third quarter. For example, supply of IGBT s (integral gate bipolar transistors) was tight until recently, says Montupet. Weaker telecommunications demand accounts for the higher level of electronic component supply.

Suppliers report a renewed focus on efficiency as the energy shortage in California continued to cause rolling blackouts into the spring season. Montupet says legislation is expected that will increase incentives for using motors that conserve energy. With this renewed focus on energy costs, A.O. Smith's Wolfe says there is "more attention being paid to part-winding or wye-delta motors, or soft-start controls, to offset peak demand rates during motor start-up." Peerbolte says efficiency is a growing concern as electricity accounts for "98% of the lifetime cost of a motor."

Jean-Paul Montupet, executive vice president, Emerson Industrial Automation, says that oil, gas and chemical processing industries are gaining momentum.