Dear Friends:
The New Year has begun pretty much like the way 2009 ended. There has not been much change in the economy. The most recent updated 2010 forecast I have seen comes from McGraw-Hill, publisher of Dodge Reports and the most trusted name in construction forecasting. They are calling for commercial and industrial construction to be down another 8% on top of last year's 30- 40% decrease (depending on your market). They are projecting that residential construction will be up about 16% and road and bridge construction will be up about 20%. To see the entire report
click here.
If you are still concentrating your efforts 100% in the commercial construction market you're going to be in for an even more challenging year than last year. I don't care to repeat last year so we are doing some things differently this year. Remember Einstein's definition of insanity: Doing the same thing while expecting different results? While some might insist I am insane, I'm not that insane. Therefore were doing several things differently this year to try to get better results.
One of the biggest things we're doing, which I know will look insane at first blush, is that we have expanded into the Atlanta market. Yes, I know the Atlanta market is widely known as not only the biggest construction market in the Southeast but also as the most competitive. We chose to expand into Atlanta at this time for several reasons:
First, it's a huge market and despite the downturn there is still more construction going on in metro Atlanta than all of our other markets combined. Second, it's only two hours from our Greenville, SC branch and three hours from our Columbia, SC branch so it's easy for us to transfer stock and/or make deliveries in the Atlanta market. Third, Atlanta is either home to at least a distribution hub for many of our best suppliers, so can get most everything we sell right there in Atlanta. And last, but not least, we were approached by a salesperson from one of our competitors in Atlanta and his key accounts told me they would follow him to New South if we hired him, and they have. So, if you are going to be doing any work in the Atlanta market, or if you are based in Atlanta, please think of us when you are buying out jobs.
On the pricing front, as the commercial construction market is continuing to decline you would expect that commodity prices would be declining due to the laws of supply and demand, right? No, wrong! As incredible as that may sound please read below for a full explanation.
Prices for many commodities increased dramatically in December and January, due mainly to surging demand from China and an unusually cold December and early January. Scrap steel prices have increased by $50.00/ton since January 1st and prices for metal alloys such as copper and stainless steel have risen by over 10% since late November. Even the price for uncoated recycled paper, which is used in some construction materials, has seen a 40% increase over the past few weeks. Crude oil and natural gas prices rose significantly as of late, due primarily to the coldest winter in decades. The end result will be that, despite weak domestic demand, prices for many construction materials will increase significantly in the first quarter of 2010.
In December concrete reinforcing wire mesh manufacturers indicated that they would increase prices between 8 and 12% by February 1st, due to their increased cost for wire rod. Wire rod manufacturers increased prices by nearly 20% for January orders, which was much more than they had indicated they would raise prices back in early December. Because wire rod prices increased more than expected, concrete reinforcing wire mesh manufacturers have announced they will now increase prices by 14 to 17% by February 1st. Wire rod manufacturers have already notified their customers to expect another price increase for February orders, due to the higher price they are now paying for scrap steel, so expect prices for concrete reinforcing wire mesh to increase again in March. We advise that if you have upcoming projects that require concrete reinforcing wire mesh that you buy out these projects as soon as possible to avoid further price increases.
Nucor announced on January 13th that they would increase prices for February rebar rollings by $60.00/ton or $3.00/cwt. Other domestic manufacturers quickly followed with price increase announcements of their own. This will be an 11% increase over the January price, which will be the second consecutive month of double digit increases. As with concrete reinforcing wire mesh, most analysts expect another price increase for March rollings. Please be sure that you factor in the higher price when you are preparing your bids.
As reported in last month's newsletter, masonry reinforcing prices will increase by 20% in January, due to increased prices for wire rod and zinc. Masonry reinforcing manufacturers received notices from wire rod suppliers the week of January 11th that there will be another price increase in February of approximately $3.00/cwt. Because of the February wire rod price increase, expect masonry reinforcing manufacturers to raise prices again by April.
Copper prices continue to skyrocket and the current market price is now approximately 17% higher than in early December. Most analysts expect the price of copper to continue to rise in the coming months and to be well over $4.00/lb soon. Although copper thru-wall flashing manufacturers increased prices in January, they have already indicated that they will increase prices again sometime in February or March, due to higher copper prices. You should consider buying out any projects you have which have copper thru-wall flashings, as prices are expected to increase well into the spring of 2010.
Polyethylene resin prices increased by $.04/lb in December, by $.03/lb in January, and resin manufacturers have already notified their customers that the price for February shipments will increase by another $.05/lb. Although demand remains weak in the construction industry, manufacturers of construction materials made from polyethylene resins will increase prices in February. Advanced Drainage Systems, the largest manufacturer of corrugated polyethylene drainage pipe in the US announced on January 6th that they will increase prices by 4.5% on February 15. Also, most major polyethylene sheeting manufacturers have indicated that they will increase prices between 5 and 10% on or about February 1st. With natural gas prices continuing to rise, many analysts expect another increase for polyethylene resins in March, so prices for construction materials made from these resins will probably increase again by mid-spring.
Sonoco Products announced on January 13th that they will increase prices for Sonotube concrete forms 4.5% effective February 15th, due their increased cost for uncoated recycled paper, which is the primary component in their concrete forms. Other manufacturers of these types of concrete forms are expected to follow Sonoco's lead and increase prices by a like percentage.
Plastic resin prices have increased dramatically over the past 90 days, much like polyethylene resins. Because of the increased cost of resins, Raven Industries announced a price increase for Vapor Block, their under slab vapor barrier effective February 1st. Other manufacturers such as Stego and Viper are expected to increase prices in February also. With resin manufacturers having already announced another increase for February and with speculation that resin prices will continue to move upward in March, plastic vapor barrier manufacturers may increase prices again in March or April.
The latest AGC Construction and Materials outlook and PPI tables also just came out. Click below if you want to see them. Click here for the Construction and Materials Outlook Presentation
Click here for the Construction and Materials Outlook Presentation
Click here for the Producer Price Indexes (PPIs) for Construction Materials and Components
This month we are turning the spotlight on the following three suppliers:
- BoMetals is one of the top suppliers of metal keyway, PVC waterstops, masonry control joints, and other concrete and masonry accessories in the industry. They have a wide range of products available, and all of them are available at your nearest New South branch.
- ARDEX is the industry-leading manufacturer of specialty cement products for flooring and building professionals in North America. We have been trying to get this line for years so we're excited to finally be able to offer this product to you. Next time you see ARDEX spec'd on a job let us give you a price.
- ABT PolyDrain is one of the most recognized names in trench drains, and ABT®, Inc., is a world leader in surface drainage solutions. ABT products are now available at your nearest New South branch. Let us quote you on your next job calling for trench or surface drains.
This month's management article might be a bit premature, but why not be an optimist?
The article is entitled, How to Rebound, Recover, and Restart Growth.
As I said, this article might be a bit premature but it may just cheer you up reading it.
Another thing that we're doing starting this month is including a link to the monthly special fliers from each of our branches.
Each of our branches has overstocks, discontinued items, returned items, special orders that no one ever picked up, etc.
Rather than give these to an auctioneer to dispose of we would rather give our customers first crack at these items.
They're all deeply discounted and all materials are in like new condition unless otherwise noted.
Please click here to view the specials page,
then select the flyer for the branch closest to you. I think you'll be pleasantly surprised at the deals we're offering.
Also, don't forget to check our Twitter feed periodically (twitter.com/NewSouthSupply)
for links to lots of great articles and forecasts about our industry. In less than four months we have sent out over 300 "tweets" and if you haven't been following them you've missed out on a lot of great, and very timely information.
In closing, I hope that the experts are wrong about 2010 but my gut is telling me they aren't. You can count on us to continuously reinvent ourselves so that we're around to service you not only now, but well into the future.
Best regards,
Jim
Jim Sobeck
President
(864) 325-6518
jim.sobeck@newsouthsupply.com
Stay up to date on the latest industry news by following us on Twitter.
http://www.twitter.com/NewSouthSupply
How to rebound, recover and restart
growth
by Dave Anderson
An economic downturn can impair your
thinking by causing you to wait. You wait for better news, for the market to go
up, or for the government to do something to change your fortunes. You develop
a "bunker" mentality, where you hunker down in your office to wait
out the storm. You become less visible and accessible and develop a passive
leadership style that causes you to maintain, rather than grow your business.
Following are three facts about a downturn, as well as five steps to rebound,
recover and restart growth coming out of a recession:
- Passivity
prolongs the duration of a downturn, whereas proactivity shortens it. When
you take a proactive approach to an economic malaise, you don't have to
participate in it as long as your competition.
- You must do all
you can to end the crisis in your business quickly. The longer mediocrity
lasts the more likely it is to become "business as usual," and
the less likely it is that you will be able to reverse the damage to
momentum and morale.
- You can't wish
your way or wait your way out of a downturn. You must work your way out of
a downturn. If the recession has caused you to lose your killer instinct,
you must regain the upper hand within your enterprise now. The longer you
stay in your box, the more likely it is to become a casket.
Five steps to rebound, recover and
restart growth:
1) Focus more of your time, energy and resources on the aspects of your
business that you can control. If you don't abandon the "blame
game" and begin to take more responsibility for what you can control on a
daily basis you'll become powerless. Blame is the anti-focus, and when you
engage in it, you lose your personal power. Despite the convenience of blaming
outside conditions for your woes, it is your inside decisions that exacerbate
the effects of a recession. Whether you want to admit it or not, the downturn
exposed your sins of the good times. It revealed where costs get out of hand,
where you had gotten lax with recruiting, hiring, training, accountability and
daily disciplines. These are all factors of your business that are within your
control, and in order to restart growth, you must recommit yourself to them now
.
2) Intensify your training. If you're seeing
fewer opportunities and you still want to grow, you must maximize the customers
and assets you already have. You can only accomplish this through more highly
skilled employees led by stronger managers. Cutting training during a downturn
is stupid and irresponsible. It's like flunking a test and then swearing off
homework! Unless you take the time to rebuild your capacity to produce, you're
unlikely to rebuild sustainable production. While you may covet production
increases, increased capacity to produce must come first! In a downturn you've
got more time than ever to train. Your job is to turn this downtime into prime
time.
3) Act as a catalyst. The chances are good
that some of your managers have stopped leading during the downturn. They talk
like leaders but act like anchors. They have stopped stretching, changing,
training and risking. Instead, they preside, administer and send out memos.
They lead from the rear, rather than from the front. They don't interact with
customers and fail to inspire or impact anyone working for them. Incidentally,
this list of charges isn't limited to your managers, it may be a reflection of
your own leadership sins. If this is the case, it's time for you to start
leading again. Get more involved with your people and customers, become more
decisive, take mature risks, change what needs changing and start making things
happen now.
4) Redefine expectations. In a downturn,
you're prone to lose sight of your organization's vision and mission. At the
same time, performance expectations can become a joke. This weakens your
culture and makes accountability impossible. Recast your vision as well as what
you expect from each employee in terms of behaviors and numbers. Focus on
shorter term goals that create a greater motivation for employees to do
something now. Once you clear up where you're headed, what is expected and by
when, you breathe fresh life into your business and create the conditions for
renewed momentum and growth.
5) Recharge your emotional and creative
batteries.
It's common to become so busy trying to revitalize your business that you fail
to renew yourself. Pursue greater balance in your personal life and it will
reenergize you as you restart growth in your organization. Business will get
better when you do. Make personal improvement in all aspects of your life a
priority, lest your personal plateau becomes a lid on your organization's
growth.
