24 Jun June 2019 Newsletter
New South News
With the rain largely staying away in the Carolinas and Georgia, the last few weeks have been very good for construction. Hopefully that will continue for the balance of the summer, although late afternoon thunderstorms are par for the course in our market area.
The overall economy continues to be strong, and as I am writing this on June 20 the stock market set another record high. I see no reason why 2019 shouldn’t be another very good year for construction.
Despite the market being strong price increases continue to be few and far between. See below for more details.
Summer is here and the large backlog of work from the winter and spring is only starting to break loose. The construction industry as a whole is quite strong, but the movement of construction materials has been slower than expected coming out of spring and winter. One part of the industry that has seen this impact their business the most is the lumber market. Low demand, paired with high levels of production, have had a major impact on lumber pricing. As a result, Canfor, one of North America’s leading lumber producers, announced significant temporary reductions at almost all British Columbia sawmills. This curtailment will be anywhere from two weeks to six weeks depending on the mill. The market reacted accordingly with demand spiking and pricing solidifying or raising depending on the size and species while buyers scrambled to cover existing and future inventory needs.
Rebar pricing remained flat again moving through June with scrap prices continuing to decrease slightly over the same time period. Production remains high and rebar mills are running with high to adequate stocking levels to fulfill most orders coming in. There may be some delay on larger diameter bar depending on roll schedules, but most standard sizes are available with quicker turn around times on delivery. Even with last month’s tariff reduction on Turkish rebar, imported rebar is still struggling to gain a foothold in the market. The cost of import bar still has not reached a level that it is desirable over available domestic bar.
Domestic reinforcing mesh is another market that has softened a bit over the past two months. High inventory levels and high production from the winter and spring has softened the wire reinforcing market some. Prices are staying level or dropping slightly. Now is a very good time to purchase reinforcing wire for either stock or projects coming up in the next few months.
The recent softening of prices doesn’t carry across all materials within our industry though. A few manufacturers have announced price increases for the coming months. Most of these manufacturers cited the recent tariff increases on imported items originating from China as the main culprit.
Mar-Mac Industries, Inc., an industry leading manufacturer of various metal items, announced a price increase scheduled for June 19, 2019. This will be an increase of 15% on their CONTRACTOR brand of nail stakes, foundation chairs, and anchor bolts. This increase will impact all orders shipping on or after the June 19th date.
Newborn Brothers Co., Inc, a supplier of caulking guns, tools, and accessories, is also implementing a price increase in coming weeks. They state the new environmental and regulatory laws in China as well as the second round of tariffs as the main reason for the increase. This increase will range from products with no change to products seeing as much as a 10% increase.
Chapin has also announced a price increase after monitoring the new tariff situation. Chapin is a manufacturer of sprayers and spreaders for the construction industry. A 9.9% increase on all spreaders and a 6.7% increase on all Chapin sprayers and parts (excluding metal sprayers) will be implemented on July 1, 2019. They do state that 30 days after the temporary tariffs are removed, this increase will be eliminated.
Contractors’ bid prices dipped in May, while materials and service input costs were flat for the month, based on the latest producer price indexes (PPIs). 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—slipped 0.1% for the month but increased by 5.4% year-over-year (y/y) from May 2018, the Bureau of Labor Statistics (BLS) reported on June 11.
Click here for the latest update on the construction economy from Ken Simonson, the chief economist of the AGC.
Our featured suppliers this month are:
Our associate profile this month is of Barrett Cooke, Vice President of Finance and IT.
Our management article this month is, How Leaders Help Team Members Support Each Other. There are some great tips here on how to get the most out of your team.
In closing, I hope you are also benefiting from the strong economy. Some economists are calling for a slowdown in 2020 so I recommend tightening up operations, replacing marginal performers, and socking some money away for a rainy day. I hope I’m being overly pessimistic but, in any event, doing the above won’t hurt you and should help.