- MARKET SECTORS
- Al Levi: Managing Your Business
- John Siegenthaler: Hydronics Workshop
- Dan Holohan: Heating Help
- Julius Ballanco: Plumbing Primer
- Paul Ridilla: Practical Management
- Kenny Chapman: Blue Collar Coach
- Adams Hudson: Marketing Strategies
- Jim Hamilton: The Bottom Line
- Ray Wohlfarth: The Boiler Room
- Morris Beschloss: Beschloss Perspective
- Bob Miodonski: Editorial Opinion
- WEB EXCLUSIVES
The U.S. import price index jumped 2.8% in March, and 15% compared to March 2007, the Bureau of Labor Statistics (BLS) reported today. Both petroleum prices (up 9.1% for the month, 60% over 12 months) and nonpetroleum prices (1.1% and 5.4%) climbed.
BLS noted, “The largest contributor to the March increase in nonpetroleum prices was a 3.6% advance in the price index for nonpetroleum industrial supplies and materials. That rise was mostly driven by a jump in unfinished metals prices, although higher prices for natural gas, finished metals and chemicals also factored into the advance. Nonpetroleum industrial supplies and materials prices rose 14.7% over the past 12 months.” Many of these items affect the cost of construction materials.
On April 3, the Institute for Supply Management reported that purchasing executives at nonmanufacturing entities had listed the following items relevant to construction as up in price in March: aluminum products, carbon steel pipe, construction labor, copper wire and products, diesel fuel, freight charges and fuel surcharges, pipe, plastic products, steel and stainless steel and products, wood products. This was a much longer list than in recent months, especially with respect to construction inputs. Steel was listed as being in short supply.
Steel mills announced this week that they were raising prices by $147 per net ton for rebar, merchant bar and structural steel. One supplier quoted increases for plate and sheet products, structural beams and channel of $70-$110/ton effective May 1, and tubing and piping went up $100/ton on March 28. Mills typically announce prices for the start of the next month, including a surcharge based on American Metal Market’s shredded auto scrap index.
The May increase nearly doubles the surcharge to $555 from December’s level of $280. One precaster reported today, “This would drive our fabricated rebar pricing up 7-8 cents per pound (lb.) or around 13 to 15% more than April pricing...rebar and strand are increasing every month and sometimes within the month. Another example is one precast strand supplier whose April pricing had been a little under $30 per 1000 linear feet (mlf) and had quoted May and June increases adding approximately 10%, revised their price earlier this week to $350/mlf effective immediately with no May or June commitment.”
Copper futures for May delivery closed today at $3.94/lb. on the Comex division of the New York Mercantile Exchange (Nymex). Bloomberg News reported, “The metal reached $4.039 yesterday on concern supplies will trail demand. The highest price ever for the most-active contract was $4.04 in May 2006.”
West Texas Intermediate (WTI) crude oil and heating oil futures set records on the Nymex on Wednesday and closed today just shy of those highs at $110 per barrel (bbl.) and $3.20 per gallon (gal.), respectively. Natural gas futures closed today at $9.90 per million British thermal units, down 20 cents from Thursday but up 25% from a year ago. The national average retail price of highway diesel fuel was $3.96/gal. on Monday, down 2 cents from a week earlier but up $1.11 (39%) from a year ago, the Energy Information Administration (EIA) reported. On Tuesday, in its Short-Term Energy and Summer Fuels Outlook, EIA projected that WTI crude would average $101/bbl. in 2008, up 39% from 2007; diesel fuel would average $3.62/ gal., up 26%; and the Henry Hub natural gas spot price would average $8.59 per thousand cubic feet (mcf), up 20% from 2007. These projections exceed last month’s projections. Contractors use diesel fuel for offroad equipment and construction trucks, and indirectly pay for it through fuel surcharges on deliveries and in the price of goods that are mined, manufactured and milled using diesel. Natural gas is a feedstock for many construction plastics.
High petroleum and natural gas prices are leading to more construction in some locations. Oil Daily reported today, “The Bakken formation, stretching from Montana into North Dakota, has an estimated 3-4.3 billion barrels of undiscovered, technically recoverable oil, according to a U.S. Geological Survey (USGS) assessment released Thursday. The USGS said the Bakken play is the largest ‘continuous’ oil accumulation it has ever assessed.” On Monday, the Wall Street Journal reported, “Saudi Aramco and Royal Dutch Shell have begun plowing an expected $7 billion into the most ambitious refinery project in more than 30 years [in Port Arthur, Texas, where Valero Energy is] involved in its own multibillion-dollar expansion”. But New York Governor David Paterson “said the state is rejecting a proposal to build the world’s first floating liquefied natural gas terminal in the middle of Long Island Sound,” AP reported on Thursday.
Reed Construction Data reported today that the year-to-date value of nonresidential construction starts collected by the company fell 6.6% in January-March 2008 compared to the same months of 2007. Heavy engineering construction was off 11%. Nonresidential building construction was off 5%, with retail construction down 14%.
“Weak consumer spending is pushing struggling retailers close to or over the edge, and that is starting to hurt shopping-mall owners,” the Journal reported on Wednesday. “The list of weak retailers is growing by the day, including furniture seller Domain Inc., high-end jeweler Fortunoff Inc. and electronics merchant Sharper Image Corp., all of which have sought bankruptcy protection since January. Mall mainstay Foot Locker Inc. closed 274 stores last year and anticipates 140 more closures this year. Jeweler Zale Corp. is closing 100 stores in the wake of disastrous holiday sales. Wilsons the Leather Experts Inc. is closing 158 of its 260 mall stores this year, and teen retailer Pacific Sunwear of California Inc. is closing its 153-store Demo chain. Making matters worse, new construction will raise the total amount of retail space by 3.5% this year in the top 54 U.S. markets,” according to Property & Portfolio Research Inc.