C-MACC Perspectives No 11
The Permanent Destruction of Margin
While we have seen some product shortages, related to medical supplies and food over the last two months, it is hard to imagine any shape of recovery that leaves the world short of anything – from gasoline to washing machines.
- As manufacturers operate below capacity – with the incremental margin destruction that it brings – the inevitable two questions will arise; “if we could make and sell the product for less, would we see more demand?” and “how do we make it for less”. If you can sell more $18,000 Camrys than $24,000 Camrys – how do you make one for $18,000?
The focus of this piece is the risk that the current downturn poses for the specialty chemical and polymer industries, but the argument could apply equally to any supplier of “value added” materials or services to industries under meaningful operating rate and margin pressure.