MECHANICAL CONTRACTING
Tracking copper & steel — the industry’s new gold
BY MARK PERRONE A 70
t Boston-based J.C. Cannistraro LLC, we install a lot of copper, mostly tubing;
it is priced by the pound. It seems the list price changes a minimum of 12 times a year. A lot of times with little notice, the ensuing discount off the list price changes daily, all driven by the commodities market. The best way to track copper is in
the commodity market under “CU” There the daily price of copper is moving up and down all day long. Pricing varies even between locations as it is tracked in New York, London and Shanghai; they also track inventory levels of these precious metals. Recently, the New York price of “CU” was $4.16/pound. I wish it was as easy as dividing the weight of my truck load by this figure and have my exact cost but we don’t buy of the market, we just use it as reference. The best way to buy copper is by
the truck load (40,000 pound minimum). This is generally a wholesaler with a price from the mill, adding a mark-up for handling the paperwork. When the market is screaming north, this is the best way
wholesaler’s inventory price. This is where the smaller suppliers come in to play, as the order should be bigger than what they can furnish out of stock, thus getting a real mill number. Naturally, the more bought on the low end the better; copper never goes bad. To me it is common knowledge
that this year there will be a shortage of copper. The experts analyze usage and stockpiles and the world is consuming more that they will mine. We will not feel the effect of new mines funded by the recent price
In conclusion, there are two things to consider when getting the best price: one is volume — it speaks up to a certain level anyway, and the other, more important
consideration, is cash discounts. We discount every possible bill we can and reap a few extra discount points off the invoice. It all adds up in the long run.
to purchase. If you don’t have a truck load, some suppliers might even purchase the balance for inventory to get the best pricing. However, as the market matures, it starts to change. Wholesalers now have that inventory — purchased at a lower cost — to sell with a higher profit margin. This is when you concentrate on the suppliers with the biggest inventories. The last phase is when the market retreats. It hits that level where the mill price is lower than the
hikes until mid- to late 2012; therefore, as the economy expands, the price of copper is forecast to rise above $ 5.00/lb., a 20% increase on top of recently levels. We also install a lot of steel and
steel hangers, which hold steel pipe up in buildings. Unlike copper, which is a commodity, steel is more of a man-made creation, as demand excels they produce more. As demand slows they just shut down the line. Steel is definitely a supply
and demand situation. Factors to be considered are the cost of the raw material (coke and iron ore), and the demand of other industries such as automobile manufacturing. To track steel, I use the “CRU
Steel price index.” I found it on the Web; it tracks many facets of the steel industry and gives a good indication of the average market. As steel doesn’t have the sudden ups and downs of copper, I don’t have to keep such a keen eye on it. Frequently, buying a job comes down to what the local guy has in inventory. On a side note, I was also told it’s helpful to track scrap steel, but after several hours of looking for a free index, I gave up. It seems to get anything up to date, you need to subscribe to a web page for a cost. Some things will just have to wait. In conclusion, there are two things
to consider when getting the best price: one is volume — it speaks up to a certain level anyway, and the other, more important consideration, is cash discounts. We discount every possible bill we can and reap a few extra discount points off the invoice. It all adds up in the long run. l
Mark Perrone is the
purchasing manager for JC Cannistraro LLC. He keeps on eye on the commodities market in construction, as they have a direct relationship with the materials he purchases.
phc july 2011
www.phcnews.com
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