The manufacturing world got some news late last week that is neither entirely uplifting nor completely dispiriting. The good news is that industrial production and capacity utilization did not decrease last month. The upward trend for US manufacturing continues, and we hope that it’s a sustainable one.
Growth continues, but not at eyebrow-lifting rates. According to the latest Fed figures, capacity utilization grew by 0.1 percent, from 77.3 to 77.4 percent. Industrial production was flat from January to February, but is likely to show an increase upon later revision — production figures initially showed no change for January, subsequently getting revised to show an increase of 0.4 percent.
The bottom line seems to point to one dominant issue (and two sub-factors) that challenges manufacturers and other sourcing organizations: uncertainty, brought on by 1) commodity/raw material price volatility; and by 2) the government policy landscape.
Commodity Price Volatility
Following the latest ISM PMI figure, which also decreased month-on-month in February but remained in positive growth territory, companies voiced concern over price volatility.
“Business is holding steady. Concern over commodity prices ongoing,” a chemical products manufacturer responded to the ISM survey. Another respondent, working in the machinery sector, said “”Still somewhat cautious about recovery. Expecting a good year, but not seeing orders yet.”
All metal categories were reported to be up in price for buyers, including aluminum products, copper products, rolled steel, scrap and titanium dioxide. The only commodity down in price was natural gas (which seems to be a trend that US and EU manufacturers are taking advantage of for the long term — see GM’s plans for natural gas vehicles, and a report claiming that 1 in 3 large vehicles in Europe will run on LNG by 2035.)
Manufacturing-Friendly Government Policy
Economist Chad Moutray, writing in the National Association of Manufacturers’ (NAM) Shopfloor blog, said that in order to see continued growth across all manufacturing sectors, Washington must put through more business-friendly policies.
This issue will be directly addressed at Day 2 of our conference, Commodity EDGE: Sourcing Intelligence for the New Normal. (The kickoff sessions begin later today!) Attendees will get both US and European policy perspectives at the panel discussion, “Public Policies Sure to Impact Sourcing Organizations.”
Thierry Decocq (Founder and Managing Partner of YQ Purchasing in Belgium) leverages creativity in the procurement process — if government policies are unbending, the wisdom goes, there must be more creative ways to structure your buys to help your margins.
And Mike Zadoroznyj knows a thing or two about regulatory compliance. As VP Product Center, Treasury and Regulatory Compliance Division at Triple Point Technology, Mike’s insight can help navigate manufacturers through periods of uncertainty.
In our messy policy landscape, manufacturers need to know which policies not only affect their business today, but which ones will rear their heads in the future. Uncertainty in prices and policies may reign for now, but equipping yourself with strategic sourcing practices to best meet those challenges — that’s up to you.
*Make sure to visit MetalMiner all day tomorrow for the latest updates from our panel discussions, keynotes speeches and breakout sessions!