Asia Manufacturing Cost Drivers Report – 2016 Q3
Executive Summary-Production Cost:
Most Asian raw materials and production cost data tracked were on the rise in third quarter. Rubber, steel, aluminum, brass, copper, nickel and paper prices were all up, while wood, textiles, and ceramics were mostly ﬂat, and only a few select grades of plastic, steel and rubber had favorable price trends. The US Dollar lost some of its steam loosing ground against several of the Asian currencies while labor rates and ocean freight were unchanged. China imports and exports saw strong gains in the quarter and the China PPI was up while the CPI was down. One very bullish sign is that all the PMI indexes rose about 50 and are signaling and expanding economy. Below is a chart of the general trends and for all the details, please refer to the entire report for your further information.
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Report Details-Production Cost:
PLASTICS & RUBBER
– General Purpose plastic resin prices were mixed in the third quarter with PP and PET down significantly while PVC and PE were up significantly in price. The other resins were unchanged. Year over year, PVC is up the most (over 25%) followed by PS up over 16% and PE and HIPS which are up in price by over 8% each. Food grade PP is down the most (over 20%) followed by PET down over 9% versus one year ago.
– Engineering plastic resin prices were mostly up in the third quarter with Nylon, PA6 and PC all up over 5% and ABS and POM were unchanged. Year over year, PA6 is down the most (over 33%) from one year ago while PC is up the most (over 4%) followed by Nylon up over 2% while ABS and POM remain unchanged in price versus one year ago.
– Synthetic rubber took a huge jump in the third quarter up over 29% since July. All the other rubber prices saw little change in the third quarter except Latex, which was down over 4%. Year over year, most rubber prices remain significantly lower, most by over 10% while only Synthetic rubber is significantly higher in price, up by over 23% versus one year ago.
– For the third quarter, most carbon steel prices are up significantly including Pig Iron. Year over year, the trend is more pronounced with almost all items up double digits.
– All grades of stainless were up in price in the third quarter between 2% – 8% except 410 which was flat. Year over year, the trend is also up with all grades up in price (on average by about 10%) versus one year ago.
– Likewise, all aluminum grades were up in price about 3%-4% while the ingot price softened slightly. Year over year, prices are up significantly between 10% and 45%.
– Zinc and Nickel were both up in price over 10% in the latest 3 months while Brass and Copper were only up slightly. Year over year, Brass & Copper remain below year ago levels by 9% and 1% respectively while Zinc is up in price almost 30% and Nickel is up a little over 8% versus one year ago.
WOOD, PAPER & TEXTILES
– Wood prices saw no change in the third quarter and year over year the prices are steady with year ago prices.
– Paper prices rose across the board in the period on average about 3% with the exception of Kraft Paper, which was flat. Year over year, Kraft is down in price almost 5% while all the others are unchanged or up 3% to 4%.
– Textile prices also increased with the exception of Polyester fabric. The increase in nonwoven PP of almost 5% was the highest increase for fabrics but raw cotton jumped almost 12%, which may signal additional price volatility for fabrics in the coming months. Year over year, all prices are higher except polyester which is down in price significantly (over 35%) versus one year ago.
CERAMIC RAW MATERIALS
Alumina prices jumped almost 9% in the third quarter while the rest of the ceramic raw materials saw no change in prices. Year over year, Feldspar and Kaolin remain unchanged while Quartz is up almost 3% and Alumina is down almost 10% in price versus one year ago.
Fuel prices in China were generally on the rise in the range of 5%. Year over year, all fuels prices remain substantially below year ago rates.
Ocean freight was unchanged in the third quarter, however, the impact of the Hanjin bankruptcy is yet to he felt. Year over year, ocean freight
COST OF LABOR
Asia labor rates saw little change in the third quarter except for India which jumped 9%. Year over year, rates are up in most countries with India up the most (up 23%) followed by Indonesia (up 15%), Vietnam (up 13%) and China (up 3%) while Bangladesh & Thailand stayed even. Labor rates are a key factory in the overall production cost.
CURRENCY EXCHANGE RATE
For the third quarter, the USD weakened slightly except in regards to the RMB. Year over year, the biggest gains for the USD are against the China RMB and India Rupee while its weaker against the Thai Baht & the Indonesia Rupiah.
CHINA TRADE (Data lags by one month)
– China Imports and Exports were both up strongly in the three months ending in August, on average both were 5% higher versus June figures. Year over year, China Exports still remain down by over 3% and China Import are up by over 1% from year ago levels.
– The China Producer Price Index (PPI) jumped 2.1% indicating higher production cost in the quarter while the China Consumer Price Index decreased by 0.7%. Year over year, the China PPI is now up over 5.4% for the year while the China CPI is down 0.7% versus one year ago.
PURCHASING MANAGERS INDEX (PMI)
All of the PMI Indexes have been climbing steadily throughout the quarter and all were above 50 as September drew to a close. Year-on-year, all indexes show upward trends indicating growth and an expanding economy.
CONTACT US FOR MORE INFORMATION
Thank you for taking the time to follow trends in Asia production cost. Source International has operational offices in Louisville, Kentucky & Xiamen, China. Our passion is to partner with companies in supply management from Asia. We have a 25 year on-theground track record, a rigorous operating procedure, and a very well trained local staff. We welcome the opportunity to show you how we can add value to your supply chain in Asia and invite you to visit our offices and website to learn more about us. For additional details, please refer to the full report or contact one of our Operations Specialists for more information. Thanks for your support.