Q1 2018 Forecast Report
We are actually calling this a “Next Four Month Forecast Report” as it is coming out so late in January to be the 1st Quarter Report. Obviously, this is a very hard period to forecast. The much anticipated 232 report has now been turned into the Trump Administration, but nobody knows exactly what they will do or when they will do it. The report, with its recommendations, was turned in on Thursday, January 11, two days ahead of the deadline, and now the White House has 90 days to issue any potential action, which moves the final deadline out to April 11. Most American steel manufacturers are confident that Trump will take swift action and propose broad tariffs on import steel that will have meaningful impact and raise domestic and import prices immediately. Already, all of our steel mills have put out their notice of price increases that will be made effective the day the findings are made available, and no orders will be protected that are not in-house. The question is, “How much and when?” These 232 rulings will effect pricing on everything from hangers and rod to weld fittings and stainless steel products.
Virtually everything made from steel will be impacted. Stay tuned, hopefully in the next two to three weeks we will get some kind of leak as to what was recommended, or a full blown report on what they intend to do, ahead of the April 11 deadline.
CARBON STEEL PIPE
Regardless of the 232 tariffs that are on the horizon, steel pipe prices have gone up and will continue to increase. In the last three months, hot rolled steel coil has had three increases that total just over $140.00 per ton, and the price of scrap is definitely on the rise. Mills are starting to increase their capacity and we are even seeing lead times getting pushed out. We are already feeling the effects of tariffs put on Chinese hot rolled steel six months ago. And if the new tariffs are steep, steel pipe prices could go up as much as 18 to 22% by the second quarter. BE CAUTIOUS in your bidding and keep an ear to the ground to the findings of the 232 recommendations, they will definitely be headline news when released.
COPPER TUBING & SWEAT FITTINGS
Expect to see staggered price escalation moving into the first quarter. The estimated supply deficit on refined copper for the first nine months of 2017 should continue into 2018. China’s new environmental policies are restricting the amount of scrap copper that can be melted. Mine disruptions, due to labor force issues, continue to plague this market. At present, the COMEX is sitting at $3.15 to $3.40 level, but this could change rapidly as demand continues to pick up. Expect sweat fittings to go up 6 to 8% in the second quarter.
WELD FITTINGS & FLANGES
Weldbend just put out their own forecast last week and it is definitely scary to read. Company CEO, Jim Coulas, reported that prices have jumped three times in the last two months and he expects escalations to continue in the next quarter. Flanges could go up as much as 30% and weld fittings 10 to 15%, and this is before the 232 findings and actions are put into effect.
Mr. Coulas put out this strong statement, “It would be my recommendation for our distributors to reassess your inventories and COMMUNICATE WITH YOUR CUSTOMERS regarding the price increases and possibly even longer lead times that are on the horizon due to increased raw materials cost and demand.” I can say that for a few days this month, Weldbend backordered 10” STD long radius elbows, which for those who have seen their stock seems almost unimaginable. We strongly suggest that ALL of our customers use CAUTION in their long-range bidding.
BLACK MALLEABLE & CAST IRON FITTINGS
A 6% price increase went into effect on January 15 and will no doubt hold. If section 232 findings are positive, expect another increase in the second or third quarter.
PVC PIPE & FITTINGS
PVC pipe manufacturers announced a 5 to 10% increase on January 16. We look for a slight plateau in polyvinyl fitting pricing over the first and second quarters as more and more resin production continues to come back online after the November storms.
BRONZE & IRON VALVES
We expect to see another 5 to 7% price increase sometime in the second quarter. Demand is definitely picking up in this sector and lead times are moving out.
VICTAULIC GROOVED FITTINGS & VALVES
There will be an 8.5% increase on February 2, 2018. We do expect this increase to hold and for other grooved manufacturers to follow suit.
Expect a 10% increase in hanger pricing in the first quarter of 2018, and more to come depending on the 232 findings.
STAINLESS STEEL PIPE & FITTINGS
Pricing will remain flat, as it appears that the world supply of nickel is currently in a surplus position as high-grade Indonesian nickel pig iron has now worked its way back into the supply chain. This, coupled with the lifting of bans in the Philippines, should keep pricing stable. Electric cars utilizing nickel in their individual power cells are having a smaller impact on the nickel demand than previously speculated. Expect stainless pricing to hold through the second quarter.
The soil market remains fiercely competitive as Charlotte and Tyler fight for market share. Expect this to hold prices firm into the fourth quarter. The increase that was proposed last year just never happened.
The commercial construction market remains very robust as projects continue to roll off the drawing boards. Tower cranes continue to dot the downtown skyline, and the south loop and north gold coast continue to grow taller. Projects at both airports continue to be bid, and an increase in the institutional work is being felt. We are optimistic that this sector will continue to be solid into 2020.
The industrial market is definitely coming back as steel mills continue improvements in anticipation of the favorable 232 ruling that will allow them to reach capacity again and look to reopen closed manufacturing facilities. Government spending is also picking up as infrastructure projects continue to come out.
THANK YOU FOR YOUR PARTNERSHIP!
As we enter into 2018, it is apparent that this will definitely be a year of escalating prices, and when the 232 recommended
actions are released it could really stir things up. At Porter Pipe, we continue to pour our earnings into our $25 million dollar inventory, which will no doubt help our customers when the price escalations come. We added many new team members in 2017 as well as investing in new and more material handling equipment to help our customers save labor in the field. We THANK YOU for the partnerships that continue to help our company grow and pick up market share. We promise to continue on our quest to offer the best service and the highest fill rate in the industry. We look forward to supplying your PVF, HVAC and commercial plumbing needs in 2018!