Construction continues to be the brightest part of the overall economy, especially here in the Sunbelt. Housing starts and existing home sales continue to boom. The only downside is that lumber mills expected their sales to plummet when the pandemic hit so they shut down some mills, but the opposite happened. People leaving densely populated large cities in the Northeast and North Central US started buying homes in the Southeast and people sheltering in place decided it was a good time to build a deck or other home improvement projects. This strained the reduced lumber supply chain, so prices doubled, and availability became a problem.
See below for a closer look at pricing trends for the main products we sell.
Rebar continues to remain stable for now, but there is potential for a price increase mid to late September. Domestic scrap prices have rebounded and are estimated to increase in September by twenty or thirty dollars per gross ton. A main driver in the scrap rebound has been a healthy export market. US domestic scrap is in high demand internationally and has resulted in higher prices on material being exported. The overall shortage of domestic scrap being produced coupled with some of the available inventory being exported has tightened supply and strengthened the price. There has not been anything firm coming out of the major Southeastern mills, but talk has picked up regarding pending price increases. We would recommend taking advantage of current rebar pricing now before the chance of an increase occurs in a few weeks.
Wire mesh reinforcing seems to be a little ahead of rebar on pending price increases. We have already seen one major manufacturer implement a price increase and expect the other mills to follow in the coming weeks. Mills are reporting a significant increase in orders over the past few months and business seems to be really kicking into gear. With the increase in orders, we are starting to see some lead times extended. There is less sitting inventory available at the mills, and orders are not always able to ship out promptly. The three- or four-day lead times of the past few months has been extended out to five to ten days depending on the need. One item really being impacted are the 10ga rolls of wire. Rolls are currently in high demand and there is very little, if any, inventory of these. Some mills have even restricted the quantity able to be purchased per truckload. We don’t expect the quantity restrictions to be a long-term issue, but it
As stated in last month’s report, polyethylene price increases are now being pushed through by most manufacturers. We have received price increase notices from three major manufacturers and expect to see one or two more before the end of the month. Most of these increases are going into effect in early to mid-September. Increases are varying from 5% to 9% depending on the manufacturer. There are still some deals to be found on some older sitting inventory, but that will soon be depleted, and the new pricing will become the norm moving into the fall and winter seasons.
Lumber continues to climb at a historic pace. Last month we reported that lumber was at an almost all time high at roughly $600 per 1000 board feet. As of this month’s report, the rate is roughly $800 per 1000 board feet smashing last month’s numbers. For 2020 lumber has increased a total of 395 units, equating to over a 97% increase since the beginning of the year. Unfortunately, there does not seem to be any reprieve in site. Prices are projected to continue to increase for the foreseeable future.
Lumber is just not in free supply and the mills are nowhere near being able to catch up to backorders and future demand. The lumber market has now become a game of availability. Wholesalers, distributors, and end users are all scrambling to find available material, with little concern regarding pricing. This historic run will continue until either demand drops or availability increases, and we are not expecting either to occur any time soon.
Construction costs diverged again in July, as indicated by producer price indexes (PPIs) that the Bureau of Labor Statistics (BLS) posted today. AGC posted tables showing PPIs relevant to construction. The PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of buildings—rose 0.8% for the month, not seasonally adjusted, following a 0.3% dip in June. The y/y gain of 2.3% compared with a rise of 5.8% a year earlier.
Click here for the latest update on the construction economy from Ken Simonson, the chief economist of the AGC.
“Catching up with our Customers”
Meet Mike Mattachione of Mattachione Construction Inc., a New South Construction Supply customer based out of Apex, NC, who is this month’s featured customer in our Catching up with our Customers series. Mike is CEO of this construction business that was originally founded by his father in Canton, Ohio. Mattachione Construction works across the Raleigh/Apex, NC region, where they focus on commercial and residential masonry projects. With more than two decades of experience himself, and the company being founded in 1947, Mattachione Construction prides themselves on being full service, turnkey masonry experts, no matter the size of the masonry or concrete construction project. The construction company has worked on all different types of projects, including industrial buildings, restaurants, hospitals, retail stores, apartment buildings and more. We invite you to read his full Q&A by visiting our New South Construction Supply blog.
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