Rising raw material prices will hit engineering in general and the automotive components sector in particular,stockbroker Albert E Sharp has said.
Input prices for manufacturing industry rose 6.5% in the year to October, according to official statistics released this week. Most of the increase is in the price of fuel but the overall cost of raw materials is still on an upward trend after falling last year.
Automotive suppliers are likely to be hit hardest, because many are locked into fixed-price contracts with manufacturers. `Material price rises are passed on to the suppliers, but they are unable to pass them up the chain,’ said AES engineering analyst Steve Medlicott.
AES identified six companies which are likely to lose out if prices rise further, including components maker Avon Rubber and Wagon and fluids engineer IMI.