Current trends take a contractor’s first-hand look at the PVF market

BY MARK PERRONE
guest writer

Current trends are a brief look at the direction of the commodities market as it affects the mechanical contracting business. Every week J.C. Cannistraro installs miles of copper tube, cast iron, & steel pipe using metal hanging products to attach them to the building structure. To a lesser degree, we use silver in our brazing rod, nickel in our stainless steel, and even lead when we pack and pour joints. These metal markets follow a daily roller-coaster ride, that, in time, affect what you pay for material on a job.

Let’s face it, years ago we could lock a manufacturers pricing up for the duration of the project. Not bad when some of our projects would take two years to complete. Then a few years ago it all started to change; the soil pipe people would announce an increase and give you 60 days to take delivery. Steel pipe started a “price in effect at time of shipment” policy — where if you have a large steel pipe project you wouldn’t find out your cost until the pipe shipped. Now a day’s copper tube is priced weekly from your local supply house, and don’t bother getting prices for stainless steel unless you need it in the next couple days as most of their quotes are good for only five days.

Now on any given day with all sorts of budget numbers, job quotes and proposals for extras on the table, hopefully, this brief report will give a little insight as to where the market is headed, and if we should shave a little to land the job or be saving a little for inflation. Beware: this report is based on facts, rumors and opinions from a variety of people I see or talk to every day. It is not a crystal ball, nor a guarantee. It is just based on current trends.

Current trends February 2010: As we pass the half-way point of the first quarter of 2010, the market is pretty depressed. Copper tubing, after climbing most of last year, hit a wall in January and fell 15%. Steel has been falling for a while. Recently, all the metal markets seem to be on the downslide, as the dollar has gotten stronger. As construction starts to pick up this year and demand increases, expect everything to go up.

Copper Tube: Copper tubing has been climbing for the last year for really no good reason except speculation. The Chinese market seems to have run its course; they have a good inventory, as stockpiles in London are seeing historic highs. Some experts are predicting copper up 50% by 2013. It’s going to be an interesting roller coaster ride for the first half this year, but until we see some positive growth, it should be a soft market.

Steel pipe: While copper tube was crashing in the fall of 2008, it seemed the steel people cut production and kept the supply and demand in tact, protecting their higher prices. Lately steel caught up to itself. Steel pipe today is less than some pipe numbers we locked into jobs last year, thinking it would never get this low. But here we are. Although we only use domestic pipe, I saw quotes that imports can be bought at a 30-40% discount. I’m sure this puts a down pressure side to the market. Lately, I have seen several announced increases, talk of the “price in effect” policy and rumors that the price they are getting on some sizes is below the manufacturing cost. No doubt when the economy improves, the market will start going north. I think it is close to bottoming out and will be increasing slowly for the rest of the year.

Stainless Steel: Although we do buy stainless pipe for process applications, the real effect of stainless for us is on no hub couplings. It has always been our policy to install heavy-duty clamps, and they are a good part of the budget for sanitary and storm piping. Due to the depressed markets, there hasn’t been an increase in the cost of couplings for several years. My current conversations with a major manufacturer indicated there is no increase scheduled for the first half of 2010.
Cast Iron Soil Pipe: Cast iron has always been one of those products that had a scheduled increase every year of 5-8 %, and then a discount adjustment to squeeze another 5% out of us. I noticed there hasn’t been an increase in the last couple of years while the times were bad, and they even gave a little back in the discount column. There does not seem to be an increase in the works for the near future — at least the first half of the year. I guess supply and demand will take it from there.

Flat Steel: I would consider this the material from which we make hangers and supports. Always a good size part of our budget, most pipe is hung in the air and some even hung underground. I never gave flat steel a thought because the price never changed. When the list went up, the discount went down, and then a couple years ago (2006), the steel market went crazy, and the cost of hangers went out of sight. When I finally accepted the fact they would not give up the increases, the price fell 20%. Right now it is a soft market, but as in most of the items we track, as the building season get going, the prices will start to increase.

Please understand that the materials we install are copper, steel and cast iron. Most of these are dictated by the codes in the Commonwealth of Massachusetts or specified by the engineers with whom we work. This limits the use for us on the wide varieties of plastics that are available elsewhere. The other point I should make is our company is big on domestic manufacturing, something of which we are all proud. However, this confines our pricing to a limited group of venders, where those who use both will see a much bigger price swing.

Welcome to my world.

For nearly 30 years Mark has been the material/purchasing manager for J.C. Cannistraro LLC, one of New England’s largest plumbing/HVAC/fire protection contractors. He specializes in procurement of miscellaneous material including PVF, pipe supports, tools and equipment