Slow supply chains and strong demand elevate material prices
The Composites Fabricating Index set a new multi-year high for the month of February. Fabricators should expect material prices to remain highly volatile the longer that supply chains remain disrupted.
The Composites Fabricating Index set a new multi-year high resulting from accelerating activity in new orders, employment, backlogs and supplier deliveries.
The Composites Index rallied 6 points during February to close at a 2 ½-year-high reading of 58.3. The month’s gains were driven by a 10-point increase in new orders activity followed by a 7-point increase in backlog and supplier delivery readings and a 6-point increase in employment. Backlog, new orders, supplier delivery and employment activity all set multi-year records during the month.
The history of the Composites Index indicates that even modest changes in supplier delivery readings can have amplified affects on material prices. Fabricators should expect material prices to remain highly volatile the longer that supply chains remain disrupted.
February also marked the third consecutive month in which supplier delivery activity readings exceeded the prior record set in mid-2018. Generally, rising readings occur as a result of slowing order-to-fulfillment times which have been cause in part by COVID-19 disruptions. Making this situation more difficult is the strong rebound occurring in new orders activity which, presently, is just shy of setting its own all-time-high reading. Moreover, the combination of strong demand and sluggish supply chains have resulted in only mild gains in production but a rapid expansion in backlogs. These industry conditions have also caused a rapid rise in material prices which will hurt profitability for those fabricators who are unable to raise prices.