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 Automotive, United States, Mexico, Canada

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

Image

Optical disc molder OEM getting into micromolding with acquisition of CDA

August 29, 2014 11:24 am ET

Optical disc replicator and molder Optical Experts Manufacturing Inc. of Charlotte, N.C., has expanded its core business and entered new high...    More

Image

Baxter investing $300 million to expand dialyzers production in Alabama

August 29, 2014 12:53 pm ET

Baxter International, Inc. is expanding its Opelika, Ala. manufacturing location to boost production of dialyzers, a key component of hemodialysis...    More

Image

EPA fines RI polymer company

August 29, 2014 1:20 pm ET

A Rhode Island polymer manufacturer has reached a $60,000 settlement with the U.S. Environmental Protection Agency (EPA) for violating federal clean...    More

Image

Updating a travel icon for the professional millennial

August 29, 2014 11:44 am ET

As part of a drive to expand its customer base to include more millennials, Airstream Inc. turned to the Columbus College of Art & Design's...    More

Image

American Starlinger-Sahm begins work on new US headquarters

August 29, 2014 10:18 am ET

American Starlinger-Sahm Inc., which sells equipment for woven plastic bag production, PET recycling equipment, sheet extrusion and laminating lines a...    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report analyzes economic and market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as growth strategies being implemented by thermoformed packaging companies.

Learn more

Pipe, Profile & Tubing Extrusion in North America 2014

U.S. demand for extruded plastics is expected to grow by 3 percent in 2014, with PVC remaining the largest segment.

Plastic pipe will post the strongest gains through 2018, continuing to take market share from competing materials in a range of markets.

Our latest market report provides in-depth analysis of current trends and their financial impact on the pipe, profile and tubing extrusion industry in North America.

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

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