More than 80 percent of rubber product manufacturers faced an increase in raw materials pricing in 2018, more than double that did in 2017, according to the Association for Rubber Products Manufacturers.
The industry is facing "a strong headwind right now" in terms of pricing for raw materials, Executive Director Troy Nix said in a webinar discussing the report.
Fourth quarter performance showed a little bit of mixed returns for business momentum, Nix said.
"Some of the economic indicators kind of contradict each other," he said. "I'm not alarmed by anything, but on the other hand, I'm not jumping out of my seat for joy relative to where we are as an industry. It's more of a wait and see."
According to the report, 41 percent of respondents saw an increase in their sales in 2018's fourth quarter, compared to its third quarter. More respondents saw a decrease at 31 percent than reported remaining the same at 27 percent.
"It's obviously a good thing, anytime you see more increases than decreases when we're comparing sales," Nix said.
Digging deeper into the data, 57 percent of the respondents serving the aerospace industry reported a strong fourth quarter, Nix said. Another 37 percent of those working in the automotive industry saw a bump in Q4 sales.
Looking back farther in Q4 versus Q3 sales, 2017 had the highest percent increase in the last four years, with 54 percent reporting increases in sales compared to 19 showing decreases. In 2016, 42 posted increases with 26 percent down, and in 2015 29 percent increased sales compared to 38 percent with declines.
"When you put this in historic context, we're losing about 13 points, so I think that's interesting," Nix said.
The cause of increased sales in 2018 Q4 was a new program or volume increase with current customers for 29 percent of respondents, down from 38 percent of respondents in 2017. New customers made up 11 percent of increased Q4 sales, also down from 17 percent last year. New orders with existing projects were 9 percent, compared to 14 percent last year.
Shipments were up in the fourth quarter of 2018, compared to the third, with 48 percent of respondents seeing increases, compared to 23 percent with decreases and 29 percent remaining the same. Compared to the same period in 2017, 57 percent had reported increased shipments, with 12 percent showing a decrease and 31 percent showing no change. Again, 2017 saw the greatest increase in the category since 2015.
"When I examine performance relative to shipment … if I look at the Q4 versus Q3 of 2018, the data point looks pretty good," Nix said. "When I take a look at what's happened in the last four years, obviously 2017 was pretty strong. Then, when I go back to '15, '16, when I compare those too, we've come a long way."
Backlog from the third quarter to the fourth in 2018 has remained the same for 43 percent of respondents, up from 31 percent for the same period in 2017. It increased for 30 percent in 2018, down from 51 percent in 2017, and it decreased for 26 percent, up from 16 percent in the prior year.
"If you go back 12 months when we looked at this question … it showed that backlog was actually increasing," Nix said. "Backlog going into this year is not as solid as we'd like to see it. There's a 10 percent jump in those seeing a decreased backlog and a 21 percent drop in those seeing an increased backlog."
Looking at the production workweek tells a different story, Nix said. As other economic indicators start to go in a negative direction, workweeks have increased on trend since 2015. The Q4 production workweek in 2018 increased for 52 percent of respondents, compared to 43 percent in the same period for 2017. Both of those points are higher than those showing an increase in 2016 at 27 percent, and in 2015 at 18 percent.
The Q4 production workweek remained about the same for 33 percent in 2018, down from 46 percent in 2017. Again, both of those numbers are lower than earlier responses of 54 percent in both 2015 and 2016. The workweek decreased for 14 percent in 2018, up from 10 percent in 2017.
"Maybe the reason that backlog went down was because we had to grow expansion of our workweek to meet customer demand," Nix said. "So this is a good thing."
Nix found that smaller companies of less than $5 million in annual sales were more likely to say that the production workweek remained the same. Companies of $15 million and more "basically were adding more production hours to your work schedule," he said.
Quoting activity in Q4 2018 increased for 44 percent of respondents, down from 48 percent for the same time period in 2017. Almost the same amount, 43 percent, remained the same in 2018, up from 32 percent in 2017, and 13 percent saw a decrease in Q4, down from 20 percent in 2017.
For increasing quote activity, the trend line going backward is more level, with 42 percent increased in 2016, up from 25 percent in 2015.