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What factors impact the cost of raw material pricing?

Raw material, whether wood, minerals, crude oil or even meat, all often have varying price points rising and dropping like the stock exchange. There are many variables at play causing this to happen. Each variable affects the price point of raw materials, causing it to increase or decrease for manufacturers, distributors and consumers. Here are several contributing factors to the shifting price of such materials.

Sourcing the Material

One of the most expensive aspects of obtaining and distributing raw materials is sourcing it. If a mine runs low on the source material, if a harsh winter kills crops or if a forest fire takes down acres of lumber, readily available material is reduced, which in turn causes the price of raw material to go up. The demand remains, but as the supply is reduced, prices increase.

Transportation

The transportation of goods is another major expense to moving raw materials to different regions both within a country and around the world. This is especially true when importing or exporting the goods. As new levies and taxes are placed on goods brought in from other countries, the price for the raw material goes up. Additionally, if transporting lumber by truck or train, an increase in the cost of fuel will increase the cost to transport the goods, which causes the cost of raw material to shift.

Labor

Between transportation, sourcing the material, carrying for the material before it is ready to harvest or any other labor position along the way, if there is a shift in the work force there can be a shift in raw material pricing. If a union goes on strike, it affects raw material pricing as less of it can be transported or sourced from the earth. Other times, if the labor union reaches a deal and this includes an increase in pay, benefits or other aspects of their work, it in turn increases the price of raw material. Just about any shift in labor will have an impact on the cost of raw material.

Acts of God

Most other aspects involved in the shifting cost of raw material can, to some extent, be forecast. Acts of God typically cannot. This is a sudden and often devastating event that affects not just part of raw material sourcing and distribution, but an entire region, city or nation. The exact definition for an act of God may shift, depending on insurance purposes. But, typically, tornadoes, flooding, hurricanes, earthquakes, violent winds, volcanic eruption, tidal wave or near any other natural phenomenon that happens with little warning can shut down production and transportation instantly and for an extended period of time.

Forecasting the shift of raw material pricing is not an exact science. Like identifying a potential chance in a stock’s value, different variables are always at play. By understanding what factors impact the cost of raw material pricing, a manufacturer or user of the material can determine the best point of time in which to buy added material or when to hold off before buying additional supplies.

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Reasons for Optimism in the Manufacturing Industry under President Trump

One of the most polarizing elections in American history is now over and Donald Trump is the President of the United States. Trump promised to boost the American economy by bringing back jobs; however, the manufacturing industry has a right to remain skeptical of this promise. After all, it has been decades since American manufacturing was a strength of the economy. On the other hand, there are numerous reasons for Americans in the manufacturing industry to remain optimistic that manufacturing is on the rise. Numerous polls have already demonstrated that Americans are optimistic about the manufacturing outlook. Why is that?

President Trump has Promised to Lower Corporate Taxes

One of the biggest problems with the loss of manufacturing jobs to overseas is the high corporate tax rates imposed on American corporations, notably 35 percent. President Trump has promised to lower this tax rate to around 15 percent. This translates into more money in the pockets of the companies that they can then use to hire more employees and invest in the company. Companies may be interested in investing money in CNC automation technology. With lower corporate taxes, this can happen.

President Trump has Said he will Increase Infrastructure Spending

An increase in infrastructure spending will demand an increase in manufacturing jobs because, without the increase in manufacturing, there will be nothing to build this infrastructure out of. This means that companies will need to produce the materials used to build this infrastructure. This means more jobs in the manufacturing sector and more dollars heading into CNC manufacturing. There will be a significant amount of pressure on manufacturing companies to deliver the goods to fulfill the promises of the new president. This means a heavy investment in manufacturing jobs and manufacturing technology.

President Trump is Going to Renegotiate the Trans-Pacific Partnership

Also called the TPP, this agreement has drawn the ire of the entire manufacturing industry because this is seen as the culprit that led to the massive job loss and movement of manufacturing opportunities overseas. President Trump has promised to renegotiate this deal, leading to bigger benefits for US corporations that keep their jobs at home. This means that more companies are going to need to hire skilled manufacturing workers to fill these positions. Those interested in positions in the manufacturing industry should keep their eyes open for changes to this agreement.

President Trump will Alter the North American Free Trade Agreement

This deal has been called NAFTA and has led to a significant trade deficit with our trading partners. This deficit has placed a significant amount of pressure on American companies, specifically the manufacturing industry, because they feel they are fighting an uphill battle in the global market. A renegotiation of this deal in favor of American manufacturing could help to keep more companies in business, keeping more jobs available in the American economy. All of these reasons have combined to generate a positive outlook for the manufacturing industry under the new President.

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