January 2021 Newsletter

Dear Friends,

As the New Year begins, I want to wish all our newsletter readers health and success in 2021. With vaccines rolling out now we should be back to normal by mid-year. Luckily, construction has not been negatively affected like many other segments of our economy and that is projected to continue. In fact, Goldman Sachs is projecting 6.6% GDP growth this year due to pent up demand that will be unleashed once herd immunity has been reached and the proposed Biden stimulus plan and the long-anticipated infrastructure bill which looks like it will finally happen this year.

Also, 2021 marks our 40^th year of servicing contractors in the Carolinas, Georgia, and surrounding states. Thanks to all of you for helping us make it to this milestone. Here is a story on our 40^th anniversary milestone in the Upstate Business Journal (SC). I hope you’ll take two minutes to read it.

The previously mentioned strong construction economy has a downside: price increases and product shortages. See below for more information on this.

While price increases are generally expected at the start of each new year, the start of 2021 has brought a historical number of increases. These price increases are occurring frequently and at levels not seen since 2008. Construction commodity products such as rebar, reinforcing mesh, poly, and lumber have all seen record increases in both frequency and dollar amount.

Rebar pricing has again increased since our last newsletter and is now up $185 per ton from where it was just a month and a half ago. Metal scrap used in the manufacturing of these products is and remains the leading cause driving these increases. Scrap posted up another $90-$100 in mid-January and caused rebar mills to react and push through another $50/ton increase on finished rebar. All four major mills in our market are following the same pattern on increases. Once one of the four announces, the other three have followed suit shortly afterwards. These increases are here to stay and there is no talk of this dramatic rise turning over any time soon. Distributors of all sizes are rapidly trying to stockpile inventory to beat future increases and this large increase in purchases are hammering the mill’s sitting inventory. If scrap prices remain high and demand continues to increase, expect rebar pricing to continue to climb through the first quarter.

Wire mesh reinforcement has also seen a rapid increase in pricing over the past few months. Much like rebar, the price of mesh reinforcing is dependent on scrap metal pricing. While mesh mills were slow to push out price increases initially, there has been a rapid succession of increases released over the past month. Nothing official has been released yet, but there are rumblings of another price increase in the $75 – $100 per ton range. We are estimating this new price increase to be announced in the coming weeks.

Polyethylene manufacturers announced price increases that will go into effect early February. This price increase is ranging from 6% to 8% depending on the manufacturer. Raw material costs and increased transportation costs are stated as the main cause. Demand remains high and lead times are now consistently running in the three-to-four-week range.

The slight reprieve in the lumber market seen in the late 4^th quarter has quickly been reversed at the start of the new year. Lumber is once again a commodity on the rise. Low availability, due to low production levels, coupled with high demand and large backlogs, has driven the price on lumber back up. #3 grade is almost non-existent within the market with the only options being #2 grade or better. This is especially the case on larger width boards. Very few loads are available promptly and most loads are being quoted with two- or three-week lead times. Until production can catch up to demand levels, high lumber prices are here to stay. We expect this volatility to remain through the first quarter.

A cost squeeze for contractors intensified in December as the producer price index (PPI) for nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of buildings—inched up 0.1% from November, while the PPI for inputs to new nonresidential construction jumped 1.7%, the Bureau of Labor Statistics (BLS) reported on January 15. 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 interviewed Rick Alexander, Executive Vice President of M. B. Kahn and Division Manager of their Specialty Construction Division. A long-standing company that was founded in 1927 by Myron B. Kahn, M. B. Kahn provides a full line of construction services to take projects from concept to completion, on time and under budget. M. B. Kahn Construction Co., Inc. is equipped to offer clients all of the commonly used construction services, including: General Contracting (including Self-Performance Capabilities, Preconstruction, and General Construction), Construction Management (including Program Management, CM Agency, Preconstruction Services, and Facility Planning), and CM@Risk, as well as Design-Build, and Site Analysis & Evaluation. For M. B. Kahn, there is no “standard” project, and they recognize that each venture has distinct requirements that call for special attention and programming, and that’s what they provide to their clients. Read more and take a few minutes to read their full Q&A by clicking here.

Featured Manufacturers

CON-DRI

Premier Supplier of Reinforced Poly, Debris Netting, Wood Chamfer, and Vapor Barriers

SpecChem

Makers of Chemicals and Aggregates for the Concrete Industry

DuPont

Premier Supplier of Insulations, Sealants, and Weatherization Products

Associate Profile

Brian Brady
Sales Manager, Greensboro

This month’s associate profile is of Brian Brady, one of the Sales Managers based out of our Greensboro branch. Brian was born in Asheboro, NC and graduated from Asheboro High School. He then earned a   B. A. degree in History and Politics from Wake Forest University, cum laude. Brian is married and he and his wife, Mendy, have four children. His hobbies include family youth sports, running (he’s completed numerous 5/10K’s, half and full marathons), reading, supporting Wake Forest athletics, and live music concerts. Prior to joining us last September, Brian was in sales for Chandler Concrete and SE Retail. Brian has been a great addition to our Greensboro team.

Our leadership article this month is a recent column of mine from the Upstate Business Journal entitled, No One Ever Won an Argument with a Customer. Click here to read the full article on how to handle customer complaints in a way that your relationship gets strengthened when your resolve the issue.

Lastly, as part of our 40^th anniversary celebration we launched a new website. If you haven’t seen it yet, check it out at www.newsouthsupply.com. We think it’s cleaner and less cluttered than our prior site.

That’s it for this month. We hope for a mild winter so we all can take care of the pent-up demand for construction and that all these price increases begin to slow down. As always, let me know how we can better serve you.

Best regards,

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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