Blog posts tagged with Economy

Reconsidering Resins - November 2017

November 27, 2017 by John Hattery

Much has changed in the resins market since we last considered it in early October. The market for plastics and resins has stabilized, with the disruptions to supply caused by Hurricane Harvey dissipating as capacity has or will very shortly come back on line. Additionally, reactive buying in the face of uncertainty of supply has been replaced by more proactive supply chain behaviors. Largely, buying behavior was bullish and aggressive in in the immediate wake of the storm, studied and reflective near the peak, and is now becoming more bearish. Given we are entering the second half of the 4th quarter, a period which usually brings tight inventory management, this bearishness is entirely rational. Buyers are balancing both “traditional” year-end pressures to keep working capital tied up in inventory to a manageable minimum with the potential for additional supplies the 3 new major resin plants starting to come to market. Domestic processors will likely work to limit their purchases while they wait for prices to fall back below pre-hurricane levels. Given these changing dynamics in the supply-demand balance, carefully consider large contracts in excess of immediate demand, as prices are likely to continue their softening trend, although with higher energy

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Reflecting on Resins

October 03, 2017 by John Hattery

The market for plastics and resins continues to be somewhat confusing, operating under very different market conditions as compared to other raw material commodities. Though resin producers have learned the value of managing capacity to stabilize (and potentially to increase margins), the way they’ve been building up inventories is puzzling, even in the face of steady and increasing demand. The fact that producers were pushing for price increases as of August indicates that they anticipate increasing demand, decreasing capacity, or a combination of both, and have some confidence of realizing higher prices for their products. After Hurricane Harvey, demands for increased pricing have only strengthened as stockpiles are drawn down and infrastructure restarts are slower than hoped for. What can you do to keep up with these continually changing trends? Be responsible for your own defense. The best defense for a small manufacturer is to have multiple sources of resin pre-validated in your manufacturing process and pre-approved by your customers. This allows you to seamlessly shift from one supplier to another if faced with an unpalatable pricing demand. Be prepared to play suppliers against each other to ensure they remain in a reasonable margin band as market conditions vary, and

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Metal Musings

September 26, 2017 by John Hattery

For the past few years, manufacturers have enjoyed declining and advantageous input costs on most commodity industrial metals – copper, zinc, aluminum, iron, tin, steel, etc. The party has most definitely come to an end. As the global economy heats up, demand for industrial metals to supply the manufacturing sector in all markets likewise increases, resulting in a steady upward pressure on raw material input costs. Barring another major economic or geopolitical crisis, we have likely seen the last of a softening commodity market for quite a while, and must prepare for a period of increasing cost pressures. Manufacturers in the USA, particularly small manufacturing enterprises, need to be aware and be taking proactive steps to prevent margin erosion due to negative purchase price variance resulting from these commodity pressures. Know what your metal purchases should cost - be better informed than the salesman across the table from you. Hopefully as a manufacturer you haven’t been a passive, price-taking buyer, or a seller allowing larger customers to dictate how material cost inputs are to be dealt with. Hopefully, you already have indexing agreements in place with both suppliers and customers. Most importantly with suppliers, because without such agreements you have

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