4/13/2009

Material Impacts on the Precision Machining Industry - April 2009

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The raw materials that we track are leading indicators for the precision turning industry. Prices for all of the materials that we track are down substantially year over year, as well as from their high in 2008. Inventories are tight on most materials, with Service Center inventories at 17-year lows for steel and aluminum products, according to MSCI. We urge our members to take the published "months of current supply" figures with a grain of salt. These estimates are based on current usage. When production resumes, those "months of supply" will likely evaporate in just a few short weeks. We have seen several presentations over our career that make the point that the economy usually mimics the copper market, so we are somewhat heartened by the trend in the copper and brass indicators that we track. The price of steel scrap remains depressed, offering a different take.

The prices of the raw materials that we track are lower from our last report in January 2009, excepting copper, brass, and coke. Year over year, all prices are down significantly.

Price swing (Δ) from January 2009 to March 2009:
Aluminum: Down 11.1 percent price variation (Δ).
Copper: Up 17.65 percent same time frame.
Nickel: Unchanged same period.
Steel: Down 13.73 percent in the same two-month period.
China Coke: Up 5.78 percent.

These materials should be leading indicators of a recovery in manufacturing, since inventories are low and you can’t make products without materials. These low prices (except for copper) do not seem to foreshadow increased demand for the short term.

PMPA’s just published 2009 Business Forecast Report made it very clear that our business is driven by the forces revealed in just a couple of indicators--Housing Starts and Total Vehicles Assembled--and is led by the price of scrap, and that our markets have changed.

Read the complete April 2009 Material Impacts Report (PDF format) here.


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