Poll: Auto suppliers expect raw material prices to rise

David Sedgwick
AUTOMOTIVE NEWS

Published: June 16, 2014 10:43 am ET
Updated: June 16, 2014 10:45 am ET

Related to this story

Topics Canada, Mexico, United States, Automotive

Prices of raw materials, after several years of stability, may be due for moderate increases.

Nearly half of 82 suppliers surveyed by IRN Inc. expect raw materials prices to rise as much as 10 percent over the next year or so.

Prices of steel and plastic resin appear most likely to increase, according to the survey results released this month by IRN, a Grand Rapids, Mich., consulting firm.

Fifty-four percent of respondents expect steel prices to rise, while only 8 percent expect them to fall. Likewise, 64 percent of suppliers expect plastic resin prices to increase, while only 4 percent expect them to decrease.

Copper, which had big price increases over the past year or so, remains unpredictable. Forty-six percent of suppliers expect prices to rise, while 27 percent expect them to fall.

“I think rising vehicle production is one key factor in raw material prices” — but not the only factor, said Melissa Anderson, vice president of IRN.

In 2012 and 2013, suppliers expected stable prices for most raw materials despite rising vehicle output. This year, raw material suppliers are keeping a tighter leash on production to prevent excess inventories of their products, Anderson said.

To cope with unpredictable prices, more suppliers are indexing the cost of raw materials. Indexing allows component prices to rise or fall with raw material costs, with price adjustments monthly, quarterly or annually.

Fifty-seven percent of suppliers that seek compensation for higher raw material costs have index provisions — up from just 30 percent in 2008, according to the survey.

Indexing is far more popular than other cost recovery tools such as surcharges, one-time price increases, permanent price increases or renegotiated contracts. 

But some automakers are more willing than others to index raw material costs. 

Thirty-three percent of the respondents said Honda and Ford were likely to "satisfactorily offset" raw material price increases, followed by Toyota at 32 percent. 

By contrast, no respondents said Hyundai was likely to offset price increases, followed by Volkswagen at 4 percent and Mercedes-Benz at 5 percent. 

Survey respondents reported that Tier 1 suppliers as a group have grown more willing to index raw material prices for their own suppliers. 

While indexing has grown more popular, Anderson cautioned that it's practical only for raw materials — such as steel or aluminum — that are traded on public commodity exchanges. 

“Users say it's difficult to index plastics and rubber,” Anderson said. “There are so many customized formulas that it's difficult to protect your own recipe.”


Comments

Poll: Auto suppliers expect raw material prices to rise

David Sedgwick
AUTOMOTIVE NEWS

Published: June 16, 2014 10:43 am ET
Updated: June 16, 2014 10:45 am ET

Post Your Comments


Back to story


More stories

Magna hiring at two Michigan locations

July 28, 2014 11:43 am ET

Magna Interior Trim Components is adding a total of 169 jobs to two of its Michigan manufacturing facilities.    More

Image

ADS launches public trading on NYSE

July 25, 2014 10:41 am ET

Advanced Drainage Systems, the world's largest producer of thermoplastic corrugated pipe, made its debut on the New York Stock Exchange today with 14....    More

Image

Sealed Air's move to Charlotte will put it all under 'One Roof'

July 25, 2014 2:03 pm ET

Sealed Air Corp. shook the ground last week by announcing plans to relocate its headquarters from Elmwood Park, N.J., to Charlotte, N.C., in a move...    More

Image

Austrian mold maker seeking North American manufacturing partner

July 25, 2014 1:49 pm ET

An Austrian mold maker is looking for a manufacturing location in North America.    More

Image

Crain named to Automotive Hall of Fame

July 25, 2014 1:29 pm ET

Keith Crain, chairman of Crain Communications Inc. — parent of Plastics News — was inducted into the Automotive Hall of Fame July 24 along...    More

Market Reports

Plastics Recyclers Data Report & Directory

This exclusive MS Excel database contains all the companies from Plastics News' ranking of top North American Recyclers and Brokers by reprocessed volume and also includes a directory with materials processes, services offered and company contact information. Data is based on primary research by PN editorial staff.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events