Asia Manufacturing Cost Drivers – 6/16

 

Source International Asia Manufacturing Cost Drivers Synopsis – June 2016


Commodity Prices

General Plastic prices were mainly flat in June. General Purpose PP varieties, Food Grade PP, and PVC saw no changes whatsoever in asking price. General Purpose PS, High Impact PS, and PET all saw increases of around 2%, while HDPE decreased by nearly 3%. Prices continue to be a mixed bag year over year with half our tracked varieties showing modest 1% gains up to 10% gains, while the other half of our tracked varieties are showing modest decreases of nearly 3% all the way up to large decreases, such as Food Grade PP and High Impact PS posting 17% and 14% drops, respectively.

Engineering Grade Plastics also largely remained flat in June with the exception of PA6 which continued its downward pricing trend and lost another 3%. With the exception of ABS, which has remained flat throughout the year, Engineering Grade Plastic prices are down across the board. The largest drop is still in the PA6 market and hovering around 40% year on year. Other varieties are down anywhere from 4% to 11%.

Although Rubber Blanket prices remained flat this month, Synthetic Rubber and Latex were down 2% and 3%, respectively. Tire Rubber jumped nearly 5% in June marking a recovery from last month’s 13% decrease. Prices for Rubber in the last year continue to be 25% lower on average across the board.

Carbon Steel prices were a mixed bag in June with varieties such as Hot Roll Steel Sheet and Steel Wire posting 11% gains, while other varieties such as Hot Roll Steel tube posted decreases of nearly 8%. During the past six months, Carbon Steel prices have seen an average increase in price of over 25% with the exception of Pig Iron which is now down 12% during the same timeframe.

Stainless Steel prices posted mainly modest increases or decreases this past month. Stainless Steel Sheet 304 gained the most in price showing an over 2% increase, while Stainless Steel Sheet 201 showed the largest decrease in price posting a nearly 2% drop. Over the past six months, Stainless Steel prices continue to be up across the board realizing an average 7% increase.

Aluminum prices continue to go up as they have all year. Although increases were modest this month across all tracked varieties, year on year gains have realized an average increase of over 11%. Leading the pack in Aluminum price increases is Aluminum 6061 which has posted a massive increase of nearly 38% in the past year.

In other metals, Zinc, Brass, Copper, and Nickel all saw increases in June. Nickel posted the largest gains during the reporting period with an almost 10% increase in price. It would appear Nickel is beginning to recover from its year on year decrease in price of nearly 36%. Zinc Alloy posted the second largest increase in price with a nearly 8% gain. Zinc is now up nearly 8% year on year. Although tracked Brass varieties posted an increase during this reporting period, they are still down 16% year on year.

Wood prices remained the same and continue to be about 2% lower on average than a year ago. The only exception to this is MDF Board, which has remained completely unchanged all year.

Paper prices remained unchanged in June as they have for the past six months with the exception of Corrugated which is up nearly 1%. Kraft is down nearly 5% year on year while Art Paper is down nearly 4%.

Textile Fabrics were largely flat with the exception of Cotton, which went up 4%, and Polyester Fabric which fell nearly 3%. Year over year most fabrics have remained flat, however Cotton has seen an almost 4% drop and Polyester Fabric has realized a nearly 35% decrease.

Excluding Alumina, Ceramics prices remained unchanged in June. Alumina again reversed its upward trend in pricing mentioned in the April report and lost another 2% since May. With the exception of Quartz, which is up about 6% for the year, Feldspar, Kaolin, and Alumina are all down posting decreases of 6%, 4%, and 25%, respectively.

Labor, Fuel, Freight, and Currency

Asian Labor Rates in Bangladesh and Thailand stayed flat during the reporting period as they have all year to date. China labor rates posted an increase of a little more than 1% and are now up over 3.5% year on year.

Reversing its rise in price from last month, China Diesel fell nearly 5% during the month of June. China Petrol and Natural Gas remained flat, while LPG gas posted an almost 2% gain. Year on year fuel and power prices continue to show substantial decreases in pricing of anywhere from 15% to 27%.

Ocean Freight rates remained flat during the reporting period potentially finding a current equilibrium compared to the large decreases over the last several months. Much of the overall capacity still remains unfilled, so any increases this year seem unlikely. Year over year Freight rates to the east and west coasts are down 21% and 43%, respectively.

The FOREX markets saw a lot of activity this past month with the RMB down 1% against the USD. This trend is expected to continue with some analysts predicting an eventual 7 RMB to 1 USD exchange rate in the near future. With the exception of INR, which was down .5% against the USD, the BDT, TWD, THB, and VND all posted gains against the USD—the largest being the THB with a nearly 2% gain over the USD during the reporting period.

Key Indexes

While the Mainland China PMI index remained fairly stable in June, the Hong Kong PMI index continued to slide downward and posted a 1.2% drop to 48.6. The USA PMI increased dramatically from 51.3 to 53.2 marking a nearly 4% change. This increase in the US PMI index should be good news for all tracked economies moving forward.

China Imports and Exports were all up significantly in June. Imports saw a 3% increase while Exports rose nearly 5%. Year over year Imports are now nearly flat while Exports are down nearly 5%. It should be noted this data lags behind one month.

The China Producer Price Index (PPI) was up again recording a 0.6% gain while the China Consumer Price Index remained virtually flat. The China PPI is now up over 1.9% for the year while the China CPI is up 0.8% for the year. These continue to be positive indicators for the Chinese economy as a whole.

For additional details, exact figures or questions, please refer to the charts that follow or contact one of our Operations Specialists for more information.

Download the full report below:

Source Int’l Mfg Cost Drivers Report-June 2016

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