Exceeds Supply
Exceeds Supply
Exceeds Supply
t is rarely the case but manufacturers are talking about an “upside-down world” where multiple price increases are accepted because the material they need is far more valuable to them than ever before. Shortages in labor, port berths, trucks, semiconductors, resins, steel and other resources have not allowed manufacturers to take their production rates to the next level or to keep much inventory for a rainy day. It’s been “raining” for months.
The purchasing managers index (PMI) for manufacturing registered 59.9 percent in August, up slightly from July’s reading, indicating a small expansion in the overall economy for the 15th month in a row, after shrinking in April 2020.
The New Orders Index registered 66.7 percent, up 1.8 points from July; the Production Index moved to 60 percent from 58.4 percent in July. The Backlog of Orders Index registered 68.2 percent, 3.2 points above July.
Timothy R. Fiore, who chairs the Institute for Supply Management’s Manufacturing Business Survey Committee, says that committee panelists reported that their companies and their suppliers continue to “struggle at unprecedented levels to meet increasing demand. All segments of the manufacturing economy are impacted by record-long raw-materials lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products.”
Primary metals producers and fabricators are among the 15 industries that reported growth in activity during August.
A purchasing manager in the metal fabrication sector reported being “unable to hire hourly personnel or machine operators due to few applicants. Steel and aluminum remain in short supply. New business continues to grow and come in. [But] we are unable to handle the influx of orders without staff, both hourly and salaried.”
A survey respondent at a machinery manufacturing company reported that customer order backlog continues to climb “because we are unable to raise production rates due to supplier parts and manpower challenges. We continue to see price increases for key commodities, and logistics is an ongoing challenge that has no end in sight.”
the world is learning to live with the COVID-19 virus. 
Fiore says that disruptions from COVID-19, primarily in Southeast Asia, are having dramatic impacts on many industry sectors. “Ports congestion in China continues to be a headwind as transportation networks remain stressed. Demand remains at strong levels, despite increased prices for nearly everything,” he says.
The commodities that rose in price in August, according to the PMI survey, include not only a host of aluminum, copper, carbon and stainless steel products but also freight, diesel fuel, temporary help, packaging, semiconductors and resins. Most of those same products continue to be in short supply.
Western Europe rebounded from its double-dip recession last year, while the United States and mainland China sustained robust growth. These gains offset setbacks in India and parts of Southeast Asia and Latin America.
Global GDP is projected to increase 4.5 percent in 2022, led by strong recoveries in consumer spending and business investment, IHS Market predicts. This growth will settle to 3.2 percent in 2023 as pent-up demands are satisfied, and fiscal and monetary stimuli are withdrawn.
Regions with low vaccination rates face greater risks from the Delta variant. Outbreaks in Asia-Pacific have led to new containment measures, disrupting production and trade in a region that accounts for 37 percent of global merchandise exports.
“The U.S. economic expansion is durable,” Johnson says. Second-quarter real GDP grew at an annual rate of 6.5 percent. Expansion is being driven by fiscal and monetary support, release of pent-up demand and restocking of depleted inventories. Job openings remain at record levels.
“Asia-Pacific’s manufacturing hubs are the current hotspots for COVID-19. The spread of the Delta variant in the region is aggravated by relatively slow progress of vaccination campaigns outside mainland China. Supply chain disruptions and shipping delays persist. Semiconductor shortages have led to more global production cuts in the automotive industry [through] September,” says Johnson.
IHS Markit expects that equilibrium in the container shipping system won’t be fully restored until mid-2022 or later.
Please check out the following pages for outlooks on six metals-consuming industries: aerospace, appliance, automotive, construction, energy and transportation.
a nationwide network.
Our team is here, there and everywhere ready to help when you need it. Let us bring your business the ultimate flexibility and competitive edge so you can deliver the most consistent product to your customers!
