Q4 2018 Forecast Report
Section 301 of the Trade Act of 1974 provides the United States with the authority to enforce trade agreements, resolve trade disputes and open foreign markets to US goods and services. On September 18, President Trump issued a 10% tariff on 200 billion dollars of material originating in China and imported to the United States. Because of this new action, price increases have been released to the market and effective immediately. This affects many of the common products that our industry uses, like butterfly valves, where the vast majority of offerings, despite the brand, come from China. This new 10% tariff will be increased to 25% by year’s end if there is no new trade deal struck between the US and China. We caution all of our customers on protecting prices on such items that they may not even be aware originate in China.
DOMESTIC CARBON STEEL PIPE
Domestic carbon hot rolled steel (used to make pipe) finished September down 7-1/2% from August. Scrap metal also fell in September, which is also used in making domestic steel pipe. The domestic mill capacity continues to increase and lead times continue to shrink. This should stabilize the price of carbon steel pipe through the fourth quarter.
DOMESTIC WELD FITTINGS & FLANGES
The March price increase was accepted by the market and is fully implemented. The recent Section 301 of the Trade Act of 1974 tariff that has affected Chinese imports has caused long lead times for domestic manufacturers. Already we are seeing backorders at Weldbend that will only get worse into the fourth quarter. Although no new price increases have been announced yet, we can fully expect more increases in the fourth quarter.
COPPER TUBING & SWEAT FITTINGS
The COMEX has been low for several months now ($2.55 to $2.75 per pound) and has just recently started to climb, due to the strength of the US dollar, to the $2.85 range. This fluctuation remains fairly stable as the COMEX goes. Prices should remain stable in the fourth quarter and no increases are forecast on sweat fittings at this time.
STAINLESS STEEL PIPE & FITTINGS
The 232 tariffs drove the price of stainless up and so will the section 301 tariffs. We expect more price increases on stainless steel pipe, fittings and flanges as we enter the fourth quarter. Demand for product remains high and the balance of supply vs. demand will push prices even higher as time goes on. We caution all of our customers in their bidding of stainless projects.
BLACK MALLEABLE & CAST IRON FITTINGS
Pricing here will remain stable into the second quarter of 2019.
Victaulic pricing went up 6.5% in August and should hold firm through the next two quarters. Gruvlock has followed suit with this same increase.
PVC PIPE & FITTINGS
On October 1, prices went up by 5% for pressure fittings and 7% for DWV fittings. We expect this increase to hold into 2019. PVC pipe will definitely have an increase coming in the fourth quarter.
SOIL PIPE & FITTINGS
The 12% increase that was put through by Charlotte and Tyler on July 2 has held firm. Another increase of 8-1/2% is announced for January 1, 2019. We fully expect this next increase to be put through by both manufacturers.
BRONZE & IRON VALVES
All of the commercial and industrial valve manufacturers have had several increases in 2018. The most recent round, which went into effect on October 1, ranges from 3-10%. We fully expect more increases in the fourth quarter as the tariffs weigh heavy on this sector of the market. Production capacity is stretched as demand continues to be strong.
PIPE HANGERS, STRUT & THREADED ROD
The second and third quarters saw huge price increases on hangers, strut and rod, which ranged between 8-24%! Tariffs continue to drive up products in this sector and we expect more increases in the fourth quarter. Manufacturers are running at full capacity as world demand will remain strong into the second quarter of 2019.
Our market remains strong, as the commercial construction boom continues in downtown Chicago. Plans continue to roll off the drawing boards as projects wait on the availability of tower cranes in the US. Institutional work continues at most of our Universities and the big work is starting to roll out at O’Hare. The OCTG market will remain strong as the price of a barrel of oil comes up. Expect to see this market stress the lead times on many of the products that share the construction industry. We fully expect our local market to gain momentum through 2019.
THANK YOU FOR YOUR PARTNERSHIP
These are certainly trying times from a pricing point of view. Porter Pipe will continue to use our 30 million dollar inventory to protect as many partners as we can, for as long as we can, to help the bottom line on projects that we are supplying. We continue to offer all of our material handling equipment, that WILL impact the productivity of our customers, at NO CHARGE. We continue to invest in new equipment, our people and new branches that will better serve our customers’ needs. On behalf of the whole Porter family and our entire team, we THANK YOU for your continued support and your partnerships we have forged through 2018.