Manufacturers Have Mixed Success Coping With Higher Commodity Prices

More than a year after U.S. manufacturers began being battered with dramatically rising price for such commodities as steel, copper, nickel, oil and natural gas, theyre still trying to cope. And the results are, in a word, mixed.

Hedging commodity prices to help reduce their volatility, for example, has had limited success, according to data released this month by the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy research group. In a survey of 59 of its member companies, generally large multinational manufacturers, a minority -- 46%--said they do hedge commodity prices. But only 4% said they had been very successful in smoothing the prices of commodities. Fifty-four percent said they had had limited success with hedging, while 42% claimed moderate success.

Fifty-nine percent of all the member companies the alliance surveyed said they had added surcharges on products to try to offset at least some of the higher commodity prices. But success, again, was mixed. While 49% said they were able to pass through to customers most of the higher costs of commodities, 36% reported only moderate success, and 15% said they were able to pass through very little of their higher costs.

Among manufacturers who had trouble passing along higher prices, 34% said their customers would not accept price increases, 28% said foreign competition constrained their price-raising efforts and 17% blamed domestic competition for holding down price pass-throughs.

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