Dear Friends:

Winter appears to be over and not a moment too soon! On top of a bad economy we also had to deal with one of the worst winters we’ve had in the South for quite some time. First we had excessive rains, then freezing cold temperatures, and then snow. Even Myrtle Beach had 6 inches of snow in February. Now, as I write this letter at the end of March the weather has been consistently in the 50’s and 60’s and I hope that winter is officially over.

There also have been several industry forecasters who say that the construction economy is beginning to recover. Other than commercial construction, I think that’s the case. I still think that there has to be more of a shakeout in the area of commercial loan defaults before banks will start lending again in any meaningful amounts to commercial developers. However, commercial renovation, road and bridge, and residential construction are all on the upswing. Unfortunately, so are most commodity prices, despite a weak economy. Read below for a more detailed look at commodity prices.

Commodity prices continued to move upward in February and March, as they have for the past several months. Scrap steel jumped by $50.00/ton in early March and all indications are that scrap steel prices will increase again in April. Petroleum prices are at their highest level in over a year and the result is resin manufacturers have already announced price increases for April orders. Due to the unusually cold and wet winter in the Southeastern US, logging firms have not been able to harvest trees and several lumber mills shut down temporarily. The result of these shutdowns has created shortages of several types of dimensional lumber.

Nucor announced on March 9th an immediate price increase for rebar of $25.00/ton and also announced prices for April rollings will increase by $50.00/ton. Other domestic rebar mills also announced they would increase prices by a total of $75.00/ton by April 1st. The result of this increase will cause rebar prices to increase by over 13% by April. As most steel brokers’ inventories were relatively low prior to Nucor’s announcement, prices for rebar began to move upward immediately. Most analysts expect scrap steel prices to increase again in April and if they do, rebar manufacturers are sure to implement another price increase for May rollings. We advise you to buy out any projects you have that require rebar as soon as possible to avoid further price increases.

Several concrete reinforcing wire mesh manufacturers have already announced they will increase prices by 8 to 10% in April, as wire rod manufacturers are increasing prices by $60.00 to $70.00/ton for April shipments. This will be the third consecutive month that the industry has increased prices and most wire mesh manufacturers indicate that they will, in all likelihood, increase prices again in May, as wire rod prices are expected to continue to rise at least through May or June. If you have projects requiring wire mesh, we advise you to buy out these projects as soon as possible.

As with rebar and concrete reinforcing mesh, nearly every manufacturer of construction materials made from steel have either raised prices or will do so in April, due to their increased costs. Prices for items such as nails, concrete reinforcing bar supports, metal keyway, fasteners, dowel baskets and dowels, and even tie wire either have already risen or will increase between 8 to 15%. Be sure to call for current prices when you are preparing your bids for these items or any other items made from steel, as prices are expected to continue to increase into the summer months.

Plastic resin prices continue to soar. Plastic resin manufacturers increased prices by $.05/lb in February and by $.06/lb in March. These increases were in addition to price increases in December and January. Because of their increased cost for resins, Stego, Raven, and other manufacturers of under slab vapor barriers increased prices by approximately 7% on March 1st. Plastic resin manufacturers have already indicated they will raise prices again in April, so expect yet another increase for under slab vapor barriers to go into effect in April or May.

Polyethylene sheeting prices rose by 7% in February and by nearly 9% in March, due to four consecutive months of resin increases from their suppliers. Polyethylene resin manufacturers have announced another $.05/lb increase for April and several polyethylene sheeting manufacturers have indicated they will increase prices by another 6% by mid-April. You would be well served to purchase any requirements you have for polyethylene sheeting as soon as possible, as prices will, in all probability, increase further in the coming months.

After the earthquake in Chile, copper prices spiked as speculators believed the copper mining industry there would be shut down for several months. To many speculators’ surprise, some of the major copper mines in Chile were shut down for only a few weeks and most are expected to be back at full capacity in April. Although supply should be back to normal soon, copper prices are currently 10% higher than prior to the earthquake and are expected to remain at current levels for the next several months. Because of the increased cost for raw copper, thru-wall flashing manufacturers have indicated they will increase prices between 5 and 10% in April or May.

Although wire rod prices continue to climb, manufacturers of masonry reinforcing held the line on prices for March due to weak demand and are expected to do the same through mid-April. As they are faced with a $60.00/ton increase for wire rod effective April 1st, manufacturers have indicated that they will increase prices between mid-April and the first of May between 8 to 10%. As wire rod prices are expected to increase again in May, masonry reinforcing prices will in all likelihood increase again in June. Please be sure you factor in the pending increases as you are preparing your bids.

As stated previously currently there is a shortage of logs in the Southeastern US. Because of the log shortage, several lumber mills shut down, which has resulted in a shortage of many types of dimensional lumber. With the increased demand due to the uptick in housing starts, lumber prices have increased significantly (over 32% since the first of the year) and prices are expected to continue to increase for the next several weeks until supply increases. You would be well served to purchase any lumber you need now, as supply is not expected to be back to normal until May or June.

The latest PPI tables are out. Click for producer price index (PPI) changes in February.

This month we are profiling the following suppliers:

Simpson Strong-Tie is the industry leader in anchors and connectors. They are constantly innovating and are well known for the quality of their products. They are offering a free tool offer through the end of April. Please see below for details.
Diedrich Technologies is a long-established producer of masonry and concrete cleaners and penetrating sealers. They are now owned by Sandell Manufacturing, another long-time vendor of ours, and Sandell has revitalized this company. The next time you need any masonry or concrete cleaners or penetrating sealers please ask us for a price.
Zurn Flo-Thru is the preeminent supplier of preformed trench drains in the construction industry. They have a wide variety of sizes and shapes, as well as numerous types of grates ranging from purely functional to highly decorative brass grates. The next time one of your projects calls for trench drains, please give us the opportunity to give you a quote.

Instead of the usual management article this month I encourage you to take six minutes and view the attached presentation, Shift Happens. This is an overview of a lot of the technological shifts that have occurred in the last decade or so, as well as a look at projected technological changes in the future. We have already experienced a lot of technological changes since buying New South in November, 2001. When we bought the company most of our customers didn’t use e-mail, almost none carried a BlackBerry, and our fax machines were running almost all the time. Now it’s rare to find a customer who doesn’t use e-nail, and most of our customers carry a PDA that gets e-mail, connects to the Internet, contains all of their contacts, etc. While our fax machines haven’t been thrown in the dumpster yet, they aren’t used anywhere near as much as in 2001. I can’t think of the last time a customer or supplier asked me to fax them something.

In closing, I think we’re through the worst of The Great Recession and while I don’t expect the balance of 2010 to be a boom year by any stretch of the imagination, I think we will see progressive improvement the rest of this year and a strong 2011. At least I hope I’m right!

As always, thank you for giving us the opportunity to serve your company and never hesitate to let me know how we can do a better job for you.

Best regards,

Jim

Jim Sobeck President (864) 325-6518 jim.sobeck@newsouthsupply.com

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