Manufacturers Set to Profit on Increasing Material Costs
Raw materials prices have risen dramatically in the last year. Oil reached a record high on October 27th (55.65 per barrel). Natural gas, copper, and aluminum futures are up substantially. An increase in demand for manufactured goods is allowing some manufacturers to pass on these cost increases to their customers. GE and Caterpillar have already successfully increased prices. Bloomberg Review (Nov 19, 2004) suggests that a stronger market for exported goods, especially to countries where power and transportation needs are growing, is making it possible for some companies to sustain price increases for their products. By contrast, US automakers losing market shore to Asian manufacturers have been unable to pass on costs.
Analysts predict that some companies may be able to turn increased prices into profits as commodity prices are predicted to ease later in the economic cycle. Bloomberg identified Dow Chemical, Caterpillar, American Standard and GE as companies looking to profit from increased commodities prices. Honeywell and Delphi (an auto parts manufacturer) were listed as some of the companies hardest hit by an inability to pass on rising costs.