Slow supply chains and strong demand elevate material prices

The Composites Index rallied 6 points during February to close at a 2 ½-year-high reading of 58.3. The month’s gains were driven by a 10-point increase in new orders activity followed by a 7-point increase in backlog and supplier delivery readings and a 6-point increase in employment. Backlog, new orders, supplier delivery and employment activity all set multi-year records during the month. 

February also marked the third consecutive month in which supplier delivery activity readings exceeded the prior record set in mid-2018. Generally, rising readings occur as a result of slowing order-to-fulfillment times which have been cause in part by COVID-19 disruptions. Making this situation more difficult is the strong rebound occurring in new orders activity which, presently, is just shy of setting its own all-time-high reading. Moreover, the combination of strong demand and sluggish supply chains have resulted in only mild gains in production but a rapid expansion in backlogs. These industry conditions have also caused a rapid rise in material prices which will hurt  profitability for those fabricators who are unable to raise prices.