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Dear Friends,
Summer is officially over, but here in the South you can’t tell that with many days still in the 90’s. The construction economy in our markets is still strong as businesses want to be located here and people want to move here too.
Softness in other markets has caused the manufacturers of most of the products we distribute to slow down or stop prices increases although we aren’t seeing a lot of price decreases…yet. For a closer look at pricing for our key products, see below.
Rebar has remained flat through August and thus far through September. Shredded scrap pricing posted down only $10 per ton from August’s number with the slight dip having no effect on the current market. With current rebar demand remaining steady, but not at the high pace of prior months, domestic mills have been able to adequately keep up with distribution and market consumption levels. Most high-volume buys are still being scheduled based on rebar production rollings, but spot needs and low volume requests between rollings have mostly been able to be fulfilled with shorter lead times.
Import rebar continues to gain momentum in certain markets. Competitive pricing versus domestic rebar is now being seen in markets such as Florida and Texas. The diminishing international demand for rebar has allowed rebar importers to once again focus on moving rebar into the US. Domestic freight is still high and the cost to move material over long distances remains a factor, so the competitiveness of import rebar is greater the closer the final destination is to the port of entry.
Inventory and availability also remain strong with regards to wire mesh reinforcing. Overall market demand for mesh has slowed down over the past months and domestic mills are looking to move product. Pricing continues the slow downward trend seen over the previous few months, with most requests for material able to be fulfilled within two weeks. Quicker lead times have many distributors reducing overall sitting inventory down to one- or two-months’ supply. This is an extreme change from a year ago where distributors were purchasing six or more months’ worth of inventory due to extended manufacturing lead times.
The lumber market continues to bump along the bottom. Slight pricing increases or decreases are occurring almost every week, but typically only last for the week. One specific grade and size may see a $20 increase one week and then see a decrease near the same amount the next. These little bounces up and down seem to be occurring across most grades, sizes, and species. With the threat of a potential railroad strike now behind, there is not much expectation for pricing to dramatically shift up or down in coming weeks.
Polyethylene sheeting is following a similar trend to the other commodities listed above. Demand has subsided some and available inventory and production time have increased. Lead times for standard sizes and mill thicknesses are currently running two to three weeks. Occasionally this lead time can even shrink down to a week. Recent pricing is reflecting the current availability with manufacturers willing to move on pricing to get orders.
Contractors’ input costs declined again on balance in August, while bid prices rose, according to Bureau of Labor Statistics (BLS) data posted on September 14. Specifically, the producer price index (PPI) for material and service inputs to new nonresidential construction slid 1.1% for the month, while the PPI for new nonresidential building construction—a measure of the price that contractors say they would bid to build a fixed set of buildings—rose 0.3%. The bid-price index rose 23.9% year-over-year (y/y), while the input index climbed 13.0%. Despite the recent decline in some input prices, the y/y gain still exceeds the increase that consumers or most businesses have experienced: the consumer price index rose 8.3% y/y and the PPI for final demand (all industries) climbed 8.7%. AGC posted tables of construction PPIs.
Click here for the latest update on the construction economy from Ken Simonson, the chief economist of the AGC.
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