November 2020 Newsletter - New South Construction Supply

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Dear Friends,

First and foremost, I want to wish all of you a Happy Thanksgiving. While this has been the most unusual of years, most of us still have a lot to be thankful for. Those of us in the construction industry have more to be thankful for than most. Construction has then one of the few beneficiaries of this pandemic, depending upon what segment of the business you are involved in. Luckily, we are involved in several parts of the industry that are doing very well.

This is also “forecasting” time of the year and I’m getting forecasts from all different trade groups and consulting organizations. A consensus has emerged that the residential and industrial segments of the industry should do well next year while commercial and multifamily construction will continue to decline. Road and bridge construction is also projected to be flat, but if Congress passes the long anticipated infrastructure bill, that will help. Most forecasters are calling for the total construction market to increase by 3-4% next year.

See below for pricing trends on our key products:

We mentioned in last month’s newsletter that we were monitoring scrap metal pricing closely. There has been some movement since then and scrap posted up $10/per ton over October’s numbers. Lower than expected domestic scrap supply, coupled with higher valued export opportunities are driving the price per ton increase. Availability is expected to remain tight and scrap prices look like they may continue to rise. The mills have absorbed these minor increases so far, but we do not expect that to remain the case for long. We expect to see rebar pricing increase in the very near future. We don’t expect the increase to be as large of an increase as we saw in September, but we are expecting one to occur soon. If you have space for the inventory or a job starting soon, the next few weeks would be an ideal time to purchase for the future.

Wire mesh price increases are slightly ahead of rebar. All three major mills in the southeast have announced price increases. Most of these price increases have already gone into effect or will be in effect after the Thanksgiving holiday. Current sitting inventory purchased at earlier pricing will only last for so long, and we can expect to see the higher priced product begin impacting sitting inventory over the next few weeks. Availability remains moderate with most orders available to ship within a week or so of placing the order. The real impact on lead time stems from trucking availability. Trucking remains an issue across the US with manufacturers struggling to find a consistent supply of available and willing trucks to move product. This has been a common theme over the past few years, and we do not see this getting much better any time soon.

Polyethylene continues to be an item in high demand. There has not been an increase since our last report, but lead times remain stretched. Depending on size and quantity needed, lead times are currently running at three to four weeks. Buyers are aware of these larger lead times and have been purchasing accordingly. This typically means larger, less frequent purchases are being placed versus smaller, just-in-time purchases that were made when availability was much higher this past spring.

Lumber continues to settle from the wildest summer and fall on record. Pricing has solidified from the rapid decrease we saw over the past month. Pricing on both 2×4 and 2×8 SYP has remained stable over the past few weeks. There are sporadic trucks available at ‘overstocked’ pricing, but they are not as near as frequent as they were a few weeks ago. #3 grade SYP lumber continues to have two- or three-week lead time, but #2 grade in certain sizes is much more available. The long-forgotten term of ‘prompt shipment’ is starting to slowly work its way back onto quotes from mills and brokers.

We received two price increase notices from manufacturers in the past few weeks. Sonoco has announced a minimum of an 8% increase for all tubes and cores that will take effect on Monday, November 23, 2020. Sonoco listed the recent paperboard price increases as the reason for the price adjustment. Nomaco, a major supplier of backer rod, has also announced a pending price increase. An 11% increase on all OCFoam products will be put into effect on January 1, 2020. Price increases and availability of raw materials has produced the need for the price increase.

The cost squeeze for contractors intensified in October as the producer price index (PPI) for inputs to new nonresidential construction increased for the sixth consecutive month (up 0.5% from September). While 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—was unchanged from September, the Bureau of Labor Statistics (BLS) reported on November 13. AGC posted tables showing PPIs relevant to construction.

Click here for the latest update on the construction economy from Ken Simonson, the chief economist of the AGC.

Catching up with our Customers

In this month’s installment of our Catching up with our Customers series, we interview Jerry G. Coram, who is the President and Owner of JG Coram Construction Inc. Jerry has been a valued customer of New South Construction Supply since 2007 when we began providing his business with necessary materials for their projects. JG Coram Co., Inc. is a full-service construction company, headquartered in Mount Airy, North Carolina, and was established in 1978 by Jerry’s father. In 1983, Jerry joined full-time after spending his summers working there. He tells us that honesty in conducting business has always been very important to him and his associates. It is also evident that giving back to the community is something that is significant to him and his team, as JG Coram Co., Inc. is currently working on building a home called The Shepherd’s House, which is committed to providing a safe place to stay and various types of support for mistreated women and their children. We encourage you to read Jerry’s full interview to learn more about this charity and ways you can donate, to learn about the preservation work JG Coram Co., Inc. has been awarded for, and other ways the company gives back to those around them. Visit our website to read the fascinating Q&A.

Featured Manufacturers

SpecChem

Makers of Chemicals and Aggregates for the Concrete Industry

Spyder

Manufacturer of blades and attachments that work as long and hard as you do

Makita

Manufacturer of power tools, drill bits, blades, and other equipment

Featured Project: The Low Battery Seawall

This month we are highlighting a project profile. If you have a project you would like us to profile in a future newsletter, email me at Jim.Sobeck@newsouthsupply.com.

This profile was submitted by Owens Corning and features their fiberglass rebar that was used in the rebuilding of the Low Battery Wall in historic Charleston, SC. Four of our customers worked on this job so it is near and dear to us.

WORKING WITH OWENS CORNING FIBERGLAS™ REBAR SUPPLIED BY NEW SOUTH CONSTRUCTION SUPPLY

The Low Battery seawall is one of Charleston’s most iconic and historic landmarks. The wall was constructed in the early twentieth century along Charleston’s southernmost peninsula between Tradd Street and the “Turn” at White Point Garden. The wall facilitated a large land reclamation project creating what is now known as Murray Boulevard. A waterfront promenade along its length gives pedestrians unobstructed views of the Ashley River.

The concrete seawall, cast on top of timber piling was exhibiting deterioration of the concrete face and timber piling connections. Settlement behind the wall caused a severe slope in the promenade making it difficult for the public to enjoy its full use and made accessibility a challenge for the City’s disabled residents and visitors. With an increase in sea levels, higher tides, and more intense storms, the existing wall frequent overtops contributing to the problematic flooding of the peninsula.

The Low Battery seawall repairs, designed by Johnson, Mirmiran & Thompson (JMT), included raising the height of the wall, underpinning the wall with micropiles, constructing a new concrete pile cap tied to the existing wall, replacing lost fill material, reconstructing the face, and supporting the new ADA-compliant promenade on the pile caps to prevent future settlement. JMT selected GFRP reinforcing bars to reinforce the new concrete promenade, concrete rail posts, and the shotcrete repairs to the walls facing the Ashley River since these elements would be exposed to the most corrosive environments. Gulfstream Construction and their subcontractors Palmetto Gunite, Beech Contracting and KBS Construction completed Phase 1 from Tradd Street to Rutledge Avenue in 2020. Gulfstream selected Owens Corning® Fiberglas™ Rebar manufactured at its plant in Blythewood, South Carolina and supplied by New South Construction Supply. (Photos courtesy of Laura Boisclair, Project Manager at Johnson, Mirmiran & Thompson.) Guest article written by Gregg Blaszak, P.E., Coastline Composite. Thank you to Owens Corning for collaborating with New South Construction Supply on this project feature.)

Associate Profile

Brandon Taylor
Manager in Training, Charlotte

This month’s Associate Profile is of Brandon Taylor, a Manager in Training at our Charlotte branch. Brandon was born in Spartanburg, SC and graduated from Boiling Springs High School. He received a B.S. degree in Management from Clemson University and prior to joining us he worked as a summer intern for Roebuck Buildings (one of our customers) in the summer of 2018 and Southern Marsh Nursery in the summer of 2019. His hobbies include duck hunting and fishing. Brandon joined us in June of this past year and quickly made a name for himself with his willingness to do whatever has been asked of him. We predict a great future for Brandon.

Our management article this month features my latest column in the Upstate (SC) Business Journal about non-competition agreements (aka non-competes). Over my 40+ years in business I’ve seen too many friends and customers hire, train, mentor, and invest in people — only to have them repay them by going into business against them and biting the hand that fed them. I know that, depending on which side of the agreement you are, you either love or hate non-competes. I have had potential hires balk at signing a non-compete but when I say they don’t have to sign it if they pay all of their own expenses, I’ve yet to have a taker. If you are a business owner or manager, I hope you find this article helpful.

Lessons from the Trenches: Tips for a bulletproof noncompete agreement

By Jim Sobeck

Non-competition agreements — or “noncompetes,” as they are more commonly known — are illegal in some states and are almost always controversial, because no employee ever likes to sign one. However, as an employer, I require noncompetes from management because they have intimate knowledge of the inner workings of our business. They know who we buy from, who we sell to, what prices we charge, who our top customers are and many other trade secrets and confidential supplier deals. A competitor armed with this information would materially damage our business.

For most of the same reasons, we require noncompete agreements from our salespeople. Another major reason is that we provide liberal expense accounts for our salespeople to entertain customers. It’s unfair for our salespeople to build relationships with their customers using company expense accounts and then leave the company and compete with us.

If someone won’t sign the agreement, we won’t hire them. Many things are negotiable during the hiring process, but not this. This is probably the only thing that is sacrosanct to us.

A lot of times you will hear that the noncompetes don’t hold up in court. That is true — if they aren’t written properly based on the laws of the state where you do business. For a noncompete to be enforceable in most states:

It cannot be overly broad
It must be short in duration
Consideration must be given

Let’s examine each of the above points. By “overly broad,” I mean a noncompete can’t state that the employee can’t work for any competitor, direct or indirect, anywhere in the United States. Our agreement states that our employees can’t work for a direct competitor within a 60-mile radius of where they worked for us. Several courts have upheld our noncompetes because the judges found that the restriction was not overly broad.

“Short in duration” means no longer than one year. Our agreement calls for our employees to not work for a direct competitor, within a 60-mile radius, within the first year of leaving our employment. Our noncompete also states that our salespeople cannot solicit business from customers to which they were assigned for two years. This has also been upheld in several courts.

“Consideration” can mean a bonus for signing the agreement — but in our case, we condition our job offer upon getting a signed noncompete. Courts consider the job offer to be consideration provided that the applicant signs the noncompete prior to the first day of employment. If a company asks an employee to sign a noncompete agreement after already being employed, then consideration, in the form of a cash bonus, must be paid for the agreement to be valid. Courts feel that if an employee accepted a bonus to sign the agreement, then the agreement should be upheld because consideration was given.

Believe it or not, people have told me they signed a noncompete agreement after being employed as long as 15 years and not only didn’t receive consideration, but were threatened with termination if they didn’t sign. Unsurprisingly, courts view that such agreements were signed under duress and declare them invalid.

This information comes from 40+ years of experience, but I am not an attorney, so do not rely on my advice for your company. If you are considering using a noncompetition agreement, I urge you to find a good labor lawyer in your area to draft it.

In closing, I want to again wish all our readers a Happy Thanksgiving. We are always grateful for your support, and we are even more thankful in a year like this.

Best wishes,

Jim Sobeck
President & CEO 864-263-4377 (Direct Line)
jim.sobeck@newsouthsupply.com
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Author of The Real Business 101: Lessons From the Trenches
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