Lots of change to little effect?

BY MARK PERRONE

Welcome. This “Current PVF Trends” examines the commodities market as it effects the mechanical construction business. I hope this brief look will help you decide to shave a little to get the job or save a little for inflation.

Before I go any further, the editor tells me it’s good practice to put in this disclaimer: “Beware, this report is based on facts, rumors, and opinions from a variety of people I see or talk to every day.” No promises, just a current trend as I see it.

Two months into the second quarter, what has changed? Well, nothing, really, but then a lot. Copper tube has gone up and come down. Steel pipe vendors have sent us numerous price increase notices, but I have only seen small increases in sprinkler pipe. Valve and fittings manufacturers have all posted increases, and even recently, ironically, as I was reading a notice about hanger and strut increases, I got a phone call from a local vendor offering threaded rod at a number I haven’t seen in years; but until we get a real job to buy out, I never really know if the increase is for real, or just on paper. The one thing I do know is I haven’t seen pricing this low in quite a while — it is an ideal time to buy.

Copper

I have watched the copper Comex go from a low of $2.83 up to $3.60 and then back down to $3.07. You read reports from all of these financial experts about China’s expansion slowing or the debt in Europe is out of control and the copper market falls (that’s good for us). However, a few days later the experts on the other side of the coin offer their opinions that even a slow expansion will use more copper than the mines can produce, or some major bank is going to bail out some country I have never heard of and, lo and behold, the market heads for the sky.

I think this is a game just to amuse us. I believe a hard commodity is judged by supply and demand, and let’s face it, there’s more supply than demand in today’s market.

Steel

Steel is finally catching up to copper; for awhile it seemed to maintain its level of pricing while copper was going in the other direction. I think the supply houses were just caught with excess inventory, and right now steel seems to be a bargain. Every- day I get notices announcing price increases; however, I fail to see it reflected in our pricing. Once again it is the supply house inventory and the small demand that is keeping it low. Beware — that is all about to change.

Stainless

Lucky me, I bought a stainless job this quarter. The market seems fairly depressed; in fact, the pricing hasn’t changed much in the last year or so. Stainless pipe is always priced with surcharges, and they currently seem to be on the low side. This, coupled with the fact that I still haven’t heard anything of an increase in the cost of our no-hub clamps, makes me believe the recurring theme of supply.

Cast iron

At the beginning of the year the cast iron people put in new list pricing but adjusted the discounts to reflect no big change; but this quarter they changed the multipliers.

Historically, the cast iron industry has risen its list price at the beginning of the year. The current price has been too stable for this to continue and most likely will increase.

Flat steel

While reading price increase notices I am getting offers I can’t believe. Talk about a market in confusion! Don’t worry, when the dust settles, it will all be heading north.

In retrospect, the one recurring theme is supply and demand. We seem to have too much of one, and little of the other. The supply houses have done a good job holding back from the recent rash of manufacturer increases. However, we are busy bidding work, and we finally have something that was lacking — it’s called a backlog.

Things are changing for the better. The suppliers that have been living off their inventories to survive the economic downturn will soon have to replenish their shelves; thus the equation switches from supply to demand. This could be the last quarter for bargains.

For nearly 30 years Mark Perrone has been the material/purchasing manager for J.C. Cannistraro LLC, one of New England’s largest plumbing/ HVAC/fire protection contractors.