Q2 2018 Forecast Report
CARBON STEEL PIPE
As we all know, on March 18, President Trump signed the Section 232 proclamation initiating tariffs of 25% on all steel imports entering the United States. For years, China and other countries have been over-producing and subsidizing their production to enable them to sell cheap into our country. Very often, poor quality control and poor traceability have come with these imports. What a lot of customers don’t understand is that incoming foreign pipe has been drastically reduced by countries that anticipated these actions; not wanting ships on the water that would be turned back when the tariffs were imposed. For that reason, steel coil prices have been going up steadily since November 2017. The chart below clearly shows the price per ton on hot rolled steel coil, used to make pipe. This cost is passed on directly in the cost of carbon steel pipe. Steel pipe prices have currently escalated 32% in price since October 2017 and are certainly going higher in the next few months. We forecast these increases in our precious quarterly forecasts, and they should have taken nobody by surprise. Part of what is making these increases hold is the demand that is taking place in our country right now. Lead times on ERW pipe are currently running four to nine weeks… and demand remains strong. The OCTG market for oil country also remains robust, and this is taking up more production capacity every day. While we do NOT forecast any shortages in our market, we do caution our customers on their bidding of long range work. Porter Pipe will continue to work to protect our partners during these times, and we will be using our large inventory to slowly raise prices, as our average costs go up. We urge our customers to get a timeline protection chart put on any carbon steel pipe jobs entering the 3rd and 4th quarters.
COPPER TUBING & SWEAT FITTINGS
The COMEX remains low and is hovering around the $3.00 to $3.20 per pound level. We expect some staggered price fluctuations in copper moving into the 2nd quarter, due to some indirect pressures and the recent rate hike which has strengthened the US dollar. Copper sweat fitting prices should hold firm for the next two quarters.
STAINLESS STEEL PIPE & FITTINGS
Stainless steel pipe was also affected by the 232 proclamations. The price gap between import and domestic stainless has closed dramatically. Pricing on stainless steel pipe and fittings has escalated more than 25% in the last 60 days, and we expect prices to continue to rise as supply cannot keep up with demand. Surcharges relating to the price of nickel have held and will continue to force prices even higher into the 2nd and 3rd quarters. We caution all of our customers in their bidding and be careful on the lead times of material. Stainless steel fittings and flanges will also continue to escalate in the next 60 days.
BLACK MALLEABLE & CAST IRON FITTINGS
The 6% increase that took hold in January should hold us into the 3rd quarter.
WELD FITTINGS & FLANGES
On MArch 16, domestic producer Weldbend put through a 6.5 to 8% increase. Another increase is expected in the next 60 days, so be careful on your bids. Import fittings are certainly on the rise and heading for the 20% to 25% increase range.
Both Victaulic and Gruvlock went up 8.5% on February. No new increases are forecast here.
PVC PIPE & FITTINGS
PVC pipe went up 9% in January and should hold into the 3rd quarter. PVC DWV fitting manufacturers have announced a 13% price increase that will be in effect mid-April.
SOIL PIPE & FITTINGS
Charlotte and Tyler have both announced a 12% price increase for July 2. Where increases have been pulled back in the past, we do fully expect this one to stick, and a second increase could be on the horizon. Even though suppliers in Chicago have been put on allocation for purchases, we do not see any shortages in this market.
BRONZE & IRON VALVES
We do expect any increase on valves in the next two quarters.
PIPE HANGERS, STRUT & THREADED ROD
We saw increses of 5% to 7% in March and there will be another increase of 12% to 18% in May, which we expect will hold through the 3rd quarter.
Our market remains very busy, and manpower may become an issue this summer. The commercial high rise market continues to be bold, with new growth areas in the South Loop, the West Loop just east of the United Center, and new work on the Gold Coast as well. Hospital work is strong and O’Hare has predicted a record amount of money to be spent in the next three years. The summer school work market has recently gained some momentum and looks like a busy summer will follow. Our market is strong, and the projects continue to roll off the drawing boards. Many customers are getting price escalations put into existing work, and they are almost expected on the new projects, as the price escalations that affect our market so much are certainly headline news.
THANK YOU FOR YOUR PARTNERSHIP
These are certainly trying times from a pricing point of view, and escalations will continue. Porter Pipe will use our 30 million dollar inventory to protect as many partners as we can, for as long as we can, but the market prices will soon catch up with us all. We will continue to offer all the material handling equipment, that WILL impact our customers labor, and bottom line, at no charge. We continue to invest in new equipment, people and new branches to help serve you better. On behalf of the whole Porter Pipe family, we THANK YOU for your partnership!