Dear Friends:
Like me, you are probably watching and reading the financial news and its impact on the construction industry with much concern. While the general economy looks like it is in slow growth mode but not slipping back into a recession, it seems clear to me that the construction industry is back in recessionary mode. The expiration of the first time homebuyer tax credit has caused housing sales to fall off a whopping 28% last month and the winding down of the federal stimulus program is also having a negative effect on commercial construction. It is my belief that we will not see a recovery in the construction industry this year and I’m not confident will see a recovery even within the next year.
I say this because, on the residential side, there are still way too many unsold homes available below replacement cost and probably more to come on the market as foreclosures continue to accelerate. On the commercial side, banks are still very hesitant to lend to developers for private commercial projects because commercial foreclosures continue to add commercial space to inventory, thus dampening the need for new commercial space. Reduced business budgets have resulted in less business travel which reduces the need for more hotel rooms, etc. As I am normally an incurable optimist I hate to share my negative feelings but I try very hard to be honest when I share my thoughts with you.
Having said that, construction is still one of the three largest drivers of the American economy and there is still close to $1 trillion worth of construction going on in the US this year. While the construction industry has been in a protracted slump there is still business to be had for those who hustle and get creative. We have been pursuing segments of the construction industry that are new to us, with varying degrees of success. I urge you to not keep doing the same old thing but to look into segments of the construction industry that are related to your area of expertise. You may be pleasantly surprised.
Despite the weak construction economy, and amazing as it may seem, some suppliers are still able to get price increases to stick. They are largely doing this by taking capacity off-line to create shortages. To see more specifics about price changes for the key products which we sell, just scroll down.
Although domestic demand for many commodities remained weak in July and August, prices for some commodities, such as scrap steel, rebounded in August due to increased foreign demand. Several foreign mills, especially those located in Turkey, made large purchases of scrap steel in early August, which caused domestic scrap steel prices to increase by $32.00/ton. There are still shortages of some types of resins used in the manufacture of construction materials, which has resulted in resin suppliers continuing to raise prices in August and announcing increases for September.
After decreasing prices by $1.00/cwt in mid-July, domestic rebar mills, led by Nucor, announced on August 11th that they will increase prices for their September rollings by $25.00/ton or $1.25/cwt. The spike in the price for scrap steel was cited as the reason for the September increase. Major steel brokers, who were willing to “deal” on multiple truckload orders since the July price decrease, immediately began moving their asking prices higher when the mills announced the September increase. Although rebar prices have firmed up recently, demand remains weak and prices to contractors remain lower now than what they will be in September. If you have upcoming projects which require rebar, we advise you to purchase now to avoid the higher September prices.
Concrete reinforcing wire mesh prices remained stable in August after falling modestly in mid-July by approximately 3%. Wire rod prices are anticipated to rise in September, due the increase in scrap steel, but as demand remains weak, wire mesh manufacturers are expected to hold the line on prices for September shipments.
Polyethylene C & A film manufacturers increased prices by 10% in August, as resin prices increased by a whopping $.15/lb since mid-July. Resin manufacturers have announced another price increase for September orders of $.05 to $.06/lb as certain types of polyethylene resins remain in short supply. As resin prices will increase in September, most polyethylene C & A film manufacturers have announced they will increase prices by another 5% by mid September. As with rebar, if you have upcoming projects which require polyethylene film, we advise you to buy out these projects as soon as possible to avoid further price increases.
Manufacturers of masonry reinforcing and ties have indicated that prices for September orders will be basically unchanged from August. Although wire rod prices are expected to increase in September, masonry reinforcing manufacturers have adequate inventories of rod for their anticipated demand in September and do not feel that the industry will support an increase at this time. If the anticipated wire rod price increase for September holds, expect masonry reinforcing manufacturers to increase prices in October.
As prices for raw copper and stainless steel have remained virtually unchanged for the past several weeks, prices for thru-wall flashings made from these alloys should hold steady in September.
Several manufacturers of caulking and joint sealants have either already increased prices or have announced increases for September, due to increased costs for raw materials over the past several months. Although not all manufacturers have increased prices or announced a price increase, it is expected that most will do so by early October. Prices for these items will increase between 5 to 7%, so if you are bidding projects where you will supply caulking and joint sealants, be sure that you factor in the increase.
This month we are featuring the following suppliers:
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Sonoco Products is one of the world's largest packaging companies and is always the leader in innovation.
Their Sonotubes with Rain Guard technology allows you to let Sonotubes get wet on a job site without ruining
them like forming tubes not using this latest technology. For more information about their newest products, please see below.
- M3 Distribution is a distributor and importer of a wide variety of
concrete and masonry accessories. Their main distribution center is in High Point, North Carolina, so they
can serve all of our markets very quickly. We have found the quality of their products to be outstanding, as
is their service. Please look at their ad below for more information about their company.
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Pecora is one of the oldest manufacturers of caulking and sealants in the U.S.
They have fiercely loyal customers because of the quality of their products and their service.
To get a price on any Pecora products, just contact your nearest New South branch.
This month’s management article is entitled, No Plan is a Plan to Fail. Many of you have heard the phrase that no one plans to fail but most companies fail to plan. In my almost 40 years in the construction industry I have seen too many companies that don’t do an annual plan and just go with the flow. I submit to you that at times we are living in the call for a well thought out plan as you can’t count on a rising tide to lift all boats anymore. To that end, I urge you to read the attached article.
If you still haven’t signed up for our Twitter feed please click on
twitter.com/newsouthsupply
and check out some of the articles on the construction industry which we post daily. Of course I’m prejudiced,
but I think it’s one of the best sources of construction industry information you can find… and it’s free!
Also, after many friends and associates suggested it,
I have started a blog on Business and Management. Click
here to check it out. . If you like it, subscribe or just check back often. I will post articles on various business and management topics several times a week.
In closing, I hate being the bearer of bad news but, as I said, I try very hard to be
honest in my monthly letter. I think there are still a lot of opportunities in this industry but you have
to work harder for them than ever before. At least that’s what we’re finding.
As always, don’t ever hesitate to let me know how we can do a better job of meeting your needs.
Best regards,
Jim
Jim Sobeck
President
803-451-7035
jim.sobeck@newsouthsupply.com
No Plan is a Plan to Fail
Not having a game plan is the first step to not
making your business a success
By Nathan Jamail
In the beginning of the year, gyms are busy with
new members who have the same “old” resolutions to get into shape this year. If
a business leader wants to have a successful year, they can’t treat their
business plan like a New Year’s resolution. Instead they must treat the
business plan like a championship coach treats his game plan. All great sports
coaches have a game plan prior to starting a game.
Creating Your Game Plan
Don’t write a business plan; rather create a “game plan.” To really make it
work, a leader must do more than change the name but should understand the
difference. A business plan is something that a company would give the bank to
get a loan, or what a company may use to determine the financials. A game plan
is something that tells a leader or a person the what, how, when and why of
achieving particular goals. A game plan is all about taking control of the
business and how to ensure that others will not affect the business negatively.
Step 1. Write it Down
The first step in creating the game plan is simple, and yet it is what most
people reading this will never get to: write it down. If your game plan is in
your head, it is not a plan, it is a thought. Thoughts have no business value
until you write them down. Writing a game plan does three things for us:
creates thought process, creates confidence and creates action-results.
Step 2. Stop and Think
Professionals who create a game plan are forced to look at their desired
results and focus on what activities are required to achieve their goals. Just
the focus and thought it takes to create a game plan is beneficial and helpful.
It creates an environment to review what has worked, what hasn’t, what is
working for others, and so forth. In addition, people who create a game plan
become more confident in themselves and therefore become more motivated to take
action. A real workable game plan is more than a three-ring binder you look at
once a year and put on the book shelf for the next 11 months to collect dust.
Step 3. Be Logical
When a leader creates a game plan, it should not be a dream that a person or
team cannot achieve; however, it should be a stretch from the "norm."
Many business consultants and leaders say that making a plan realistic is a
sure fire way to limit one’s success. Realistic is not a good measurement
metric because it is limited by the past and provides excuses. For example a
sales manager will say, “The salespeople are only making 10 calls a day and it
is unrealistic for them to increase it to 50 times per day immediately.” Or,
since John has never exceeded X amount of sales then it is not realistic for
him to do so. The activity and goals need to be logical, not realistic. Logical
takes out lack of human discipline and desire. A game plan should force a
person or team to always believe they can be No. 1. Logical says, “Someone has
to be No. 1, why not me?” Stop being realistic, start being logical and don’t
let your past limit your future; let your present create a momentous future!
Implementing Your Game Plan
Although creating the plan is imperative to getting started, it is the just the
beginning. You also have to implement what you write down.
Step 1: Define Expectations
Have every supervisor explain their expectations to all direct reports,
starting with what time to be at work, and what the supervisor will do to coach
and develop their team. Even top leaders with proven success records need to do
this. The higher the pay grade, the more important the expectations. Show your
commitment as a leader by providing the template for defining expectations to
your team. A good plan will show where a person is now, where they want to be
in the next three to 12 months and, most importantly, how to get there.
Step 2: Work the plan
All leaders must inspect what they expect. Ronald Reagan said, “trust but
verify.” A great way to keep business plans front-of-mind for everyone is to
make each person present their game plan every quarter in front of their peers
and superiors. This allows the entire team to hold each other accountable. A
true game plan is worked and adjusted regularly. Having a game plan takes a
team beyond a person telling their boss or leader what they want to hear.
Step 3: Stay Committed
Many companies have the best ideas and intentions but often fall short of
keeping a successful coaching program running. Watch out for the “Power of New”
profit taker. The Power of New can be described as an organization or team that
is excited about new programs, changes or a new game plan, but after a few
months, this “new” stuff starts to look suspiciously like work and the
“fun-ness” wears off. A great leader knows that working on the business is the
only way to motivate everyone to keep working.
