Asia Manufacturing Cost Drivers Report – 7/16
Asia Manufacturing Cost Drivers Report – July 2016
Asia Manufacturing Cost Drivers – Summary
In regards to Asia Manufacturing Cost Drivers, July saw a couple tracked commodities post large increases in price. The largest being Cotton, posting a 17% gain since last month’s report. Nickel also saw big gains of over 10%. General Plastics were mainly down slightly, while Engineered Plastics remained steady. Steel & Iron prices were mainly up, in many cases over 8%, although two tracked varieties saw an over 9% drop in price. Aluminum was down negligibly across the board. China Labor rates continued their upward trend with an over 1% increase since June. Fuel and Power rates were down an average of 6%, while Currency Rates mainly continued to appreciate against the dollar. Although the USA PMI trended down about 1% this past month, the HK PMI was up over 4%—this marks good news for HK as it had been trending downward for sometime. China Imports were up around 1%, while Exports declined almost .5%. For further details, please see the entire report that follows.
Manufacturing Cost Drivers – Commodities
General Plastic prices remained flat or trended downwards in July with the exception of PVC which posted gains of nearly 3%. Both tracked varieties of PP were down nearly 5% while injection grade PE was down 1%. General Plastic Prices are now trending down more than up year on year with most varieties showing at least a 4% drop. Food Grade PP and High Impact PS are trending most favorable for manufacturers with 19% and 7% decreases, respectively. General Purpose PS has increased 9% for the year and PET is up almost 4%.
There is nothing to report on price fluctuations during this period for Engineering Grade Plastics as all prices remained flat. However, as far as year on year prices are concerned, PA6 is still trending down nearly 40%, while Nylon is down almost 10%.
Rubber Blanket prices posted a modest increase of just over 1% during the reporting period, while Synthetic Rubber jumped nearly 5%. All other tracked types of Rubber remained steady with the exception of Latex which posted a favorable downward trend of nearly 3%. Rubber prices in the last year are over 18% lower on average.
Carbon Steel prices mainly posted increases this month, some rather significant, with the exception of Hot Roll Steel Sheet and Steel Wire which both trended downward just over 9%. The biggest gainers were Cold Roll Steel Sheet and Hot Roll Steel Tube both posting over 8% increases in price since the June report. Year over year, Carbon Steel prices are a bit of a mixed bag with Hot Roll Steel Sheet and Steel Wire posting increases of 24% and 38%, respectively, while varieties such as Cold Rolled Steel Plate and Pig Iron are down 13% and 17%, respectively.
The Stainless Steel market mainly remained flat with the exception of Stainless Steel Sheet 201 trending down around 2% and Stainless Steel Sheet 304 trending up nearly 2%. Over the past six months, Stainless Steel prices continue to trend upwards and realize gains of just over 6% in overall quoted price.
In a marked departure from yearly trends, Aluminum prices all trended down this month with most tracked varieties posting approximately quarter percent decreases in price. The biggest decreases in price were realized in the ADC12 and A380 types of the material, which both posted just over 2% declines. Most types of the material continue to trend upwards year over year around 5% with the biggest increase in price still being that of Aluminum 6061 which is up around 38%.
In other metals, prices continued to increase across the board for the month of July. Nickel, again, posted the largest gains during the reporting period with an over 10% increase in price. The continued large increase in pricing for Nickel this month has now put it yearly even for the year just being down a little over 1%. The other largest increase was realized in the Zinc Alloy market and posted a gain of nearly 5%. Other tracked metals posted modest gains in price and continue to trend downward for the year, in most cases nearly 10%.
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 July 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 trended up across the board in July with Cotton posting a tremendous increase of nearly 17%. July’s increase now puts Cotton prices up over 13% year over year. 100% Polyester and Non-Woven PP both saw increase of over 4% during the reporting period, although Polyester is still down nearly 33% for the year.
Ceramics prices remained unchanged in July. With the exception of Quartz, which is up about 6% for the year, Feldspar, Kaolin, and Alumina are all down posting decreases of 7%, 5%, and 20%, respectively.
Manufacturing Cost Drivers-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 2.5% year on year.
Fuel and Power prices were down across the board this past month with China Petroleum, Natural Gas, and LPG Gas all posting decreases of over 7%. Year on year fuel and power prices continue to show decreases in pricing of anywhere from 4% to 28%.
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.
With the exception of VND, all tracked Currencies appreciated against the USD in July with INR posting the biggest gain of over 1%. CNY and BDT posted modest gains against the USD, while TWD and THB hovered around 1%. The EUR continued to depreciate against the CNY and fell another .7%.
Manufacturing Cost Drivers-Key Indexes
While the Mainland China PMI index again remained fairly stable in July, the Hong Kong PMI index shifted upward to 50.6 posting an over 4% gain since June. The USA PMI decreased from 53.2 to 52.6 marking a just over 1% change.
While China Imports rose just under 1% for the month of July, Exports lagged behind and fell nearly .5%. It should be noted this data lags behind one month.
The China Producer Price Index (PPI) was up again recording a 0.2% gain while the China Consumer Price Index decreased 0.1%. The China PPI is now up over 2.3% for the year while the China CPI is up 0.5% for the year. These continue to be positive indicators for the Chinese economy as a whole despite slower growth than in years past.
For additional details on Asia Manufacturing Cost Drivers, exact figures or questions, please refer to the charts that follow or contact one of our Operations Specialists for more information.
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