CSC - Communications Supply Corporation

Economic News for Customers and Friends of CSC
Q1 2011 The CSC Market Brief
Q1 2011 The CSC Market Brief
Servicing You With Knowledge I Rising Material Costs Greet 2011
CSC - Keeping You In The Knowledge Loop
In the short time since “The CSC Market Brief” last appeared in October 2010, raw material prices have continued to
dramatically escalate. National publishers including Bloomberg Businessweek and The Wall Street Journal, along
with many of the industry leading manufacturers working with CSC, are reporting a similar story: as raw materials
increase, so does the cost of manufacturing, and therefore prices. This issue of “The CSC Market Brief” seeks to
provide knowledge about:
Bottom Line Wrap UP:
Rising raw materials costs have created a perfect storm for cable
suppliers forcing incremental Q1 price increases on top of the
increases set forth in late 2010. The unfortunate truth is these
price increases are hitting us all, and the best thing we can do is
to communicate, educate, and work together to ride out this latest
storm. Our manufacturer partners are doing everything in their
power to steady prices. This includes analyzing the most efficient
utilization of manufacturing capacity, studying cost reductions and
containments, and evaluating new raw materials, processes and
ideas. At the same time, we are confident they will continue to
maintain the high quality products and services they have delivered
for decades.
• How the rapidly increasing price of copper affects the prices of network cabling
and data center infrastructure solutions
• How FEP, PVC and oil prices impact manufacturer pricing
• The business challenges surrounding these important products and technologies
As your unbiased industry resource, CSC wants to insure that you are armed with information as you execute your
organization’s 2011 business plan. We hope the following is helpful and encourage you to contact your local CSC
representative if you have any questions, concerns, or require additional assistance.
Sincerely,
Frank LaPlante
The Outlook for 2011: The Perfect Storm
While the U.S. gross domestic product is expected to increase
steadily in the coming year, and a double dip recession seems
to have been averted, the wire and cable industry has experienced
CSC is making every effort to secure long term commitments
from manufacturers to keep costs as steady as possible.
For more information please contact your local CSC representative.
dramatic, across-the-board increases in raw material costs. In the
past, when one of these raw material costs spiked, the industry
was able to absorb the increase. However in 2010, the industry
saw a multitude of raw material price increases taking place at the
same time -- making it impossible for manufacturers to absorb
200 East Lies Road • Carol Stream, IL 60188 • 877.462.7279
the increases and operate efficiently. This “perfect storm” of raw
material price increases is expected to accelerate in 2011. Although
this creates a challenging business climate, CSC’s commitment to
you remains steadfast: provide the industry’s most robust products
and services portfolio while keeping customers ahead of the latest
market trends so you can make better informed decisions.
4
© 2011 Communications Supply Corporation
1
Vice President, Sales and Marketing Communications Supply Corporation
Economic News for Customers and Friends of CSC
Q1 2011 The CSC Market Brief
Material Price Increases
Copper:
January 3, 2011: Copper hits a new record high of $4.45
per pound! The October 2010 issue of “The CSC Market
Brief” predicted that copper would surpass the $4.00 per
pound level, but this was eclipsed by over 10% in just
under 60 days. And this appears to be just the beginning...
that copper will reach $5.08 at some point in 2011.
electronic wire and cable and data communications cable.
Manufacturers are now facing a serious supply shortage
due to the exit of one of three FEP producers from the
wire and cable marketplace last year.
January 2010
April 2010
October 2010
From: LME Copper Spot Price USD/lb
December 2010 January 2011
are directly tied to the rising cost of oil. Other industrial
Copper 2011 Price
$
problems also contribute to price increases of PVC, as
5.08
170.0
Q1-09
Q3-09
Q1-10
Q3-10
Plastic Resins & Materials Pricing
10
%
overseas demand of U.S. product. Reuters reports that
Analysts Predict*
Increase
“95% of U.S. plants...are operating at full capacity,
THE IMPACT:
a rate not expected to slow (in 2011).”
Copper is the predominant component in high pair count products and
advanced cabling which is in high demand. The rising cost of copper
has a direct and material impact on the prices of all cabling products.
Q4-10
PVC
These include a weak caustic soda market and a growing
THE IMPACT:
PVC, the jacket and insulation compound for CM & CMR products,
is a bi-product of petroleum. The increase in PVC pricing is reflected
in price increases of the products which contain PVC compounds.
*Source - Bloomberg Businessweek, page 70
Energy and Transportation:
the migration to Cat6 and Cat6A away from Cat5e
The communications infrastructure industry is doubly
(which uses less FEP per 1000 feet). The above factors will
Average Monthly Crude Oil Price per Barrel in U.S. ($)
C ru d e O il P ric e p e r B a rre l ($ )
impacted by oil prices. Because oil is both a critical
contribute to price increases moving forward, as the very
$150.00
$140.00
$130.00
$120.00
$110.00
$100.00
$90.00
$80.00
$70.00
component in the manufacturing of communications
infrastructure products and their delivery from
real prospect of shortages continue to loom in the market.
manufacturer, to distributor, and ultimately to installation
site, the steady price increases of oil and gas are difficult
for the industry to absorb. The U.S. Energy Information
Administration (EIA) suggests that higher crude oil prices
2007
Crude Oil Price/Barrel
and higher refiner margins are leading to higher prices
Also contributing to price increases is a reduction in
2008
2009
2010
Oil
for fuel. Analysts predict diesel prices this winter will be
global mining of fluorspar, a key raw material used in the
$3.14 per gallon, up .35¢ from a year ago. Barrel prices of
manufacturing of FEP. Plus, prices for all fluorine based
2
180.0
previously reported in issues of “The CSC Market Brief.”
months, in late 2010.
electronics, photovoltaic, military, oil and gas – as well as
190.0
cabling products. Rising PVC prices and other plastics
announced a rapid round of price increases within two
is due to increased demand from other industries, such as
200.0
component of jacket and conductor insulation for
The two remaining FEP producers, DuPont and Daikin,
products have risen dramatically in recent months. This
210.0
oil price increases. Oil is used to make PVC, a key
FEP:
FEP is a fluoropolymer used in the production of
220.0
a post-recession rise since January of 2009, mirroring
in China, analysts predict copper prices will continue to
Capitol Commodity Services in Indianapolis estimated
230.0
The price of polyvinyl chloride (PVC) has been on
$3.75
$3.50
$3.25
$3.00
$2.75
$2.50
$2.25
$2.00
$1.50
the economic recovery in the U.S. and overseas, especially
Businessweek magazine, Lannie Cohen, president of
PVC:
Average Monthly price of Copper per pound (lb)
$4.50
$4.25
$4.00
Due to market dynamics, including increased demand of
rise even higher in 2011. In the Dec. 5 issue of Bloomberg
Economic News for Customers and Friends of CSC
Q1 2011 The CSC Market Brief
Analysts Estimate
oil, which topped $145 in 2008, then dropped by half that
in January 2009, have risen steadily ever since. The EIA
THE IMPACT:
expects prices to be in the $90 range by the end of 2011,
The stress higher demand places on the FEP marketplace, coupled
with a production contraction, have resulted in higher prices for
this key component of wire and cable products.
a steady increase.
3
THE IMPACT:
The trucking industry carries 70% of all freight in the U.S. Often when
gas and oil prices increase, shipping companies will pass along the
costs as percentages or surcharges on delivery of product.
Economic News for Customers and Friends of CSC
Q1 2011 The CSC Market Brief
Material Price Increases
Copper:
January 3, 2011: Copper hits a new record high of $4.45
per pound! The October 2010 issue of “The CSC Market
Brief” predicted that copper would surpass the $4.00 per
pound level, but this was eclipsed by over 10% in just
under 60 days. And this appears to be just the beginning...
that copper will reach $5.08 at some point in 2011.
electronic wire and cable and data communications cable.
Manufacturers are now facing a serious supply shortage
due to the exit of one of three FEP producers from the
wire and cable marketplace last year.
January 2010
April 2010
October 2010
From: LME Copper Spot Price USD/lb
December 2010 January 2011
are directly tied to the rising cost of oil. Other industrial
Copper 2011 Price
$
problems also contribute to price increases of PVC, as
5.08
170.0
Q1-09
Q3-09
Q1-10
Q3-10
Plastic Resins & Materials Pricing
10
%
overseas demand of U.S. product. Reuters reports that
Analysts Predict*
Increase
“95% of U.S. plants...are operating at full capacity,
THE IMPACT:
a rate not expected to slow (in 2011).”
Copper is the predominant component in high pair count products and
advanced cabling which is in high demand. The rising cost of copper
has a direct and material impact on the prices of all cabling products.
Q4-10
PVC
These include a weak caustic soda market and a growing
THE IMPACT:
PVC, the jacket and insulation compound for CM & CMR products,
is a bi-product of petroleum. The increase in PVC pricing is reflected
in price increases of the products which contain PVC compounds.
*Source - Bloomberg Businessweek, page 70
Energy and Transportation:
the migration to Cat6 and Cat6A away from Cat5e
The communications infrastructure industry is doubly
(which uses less FEP per 1000 feet). The above factors will
Average Monthly Crude Oil Price per Barrel in U.S. ($)
C ru d e O il P ric e p e r B a rre l ($ )
impacted by oil prices. Because oil is both a critical
contribute to price increases moving forward, as the very
$150.00
$140.00
$130.00
$120.00
$110.00
$100.00
$90.00
$80.00
$70.00
component in the manufacturing of communications
infrastructure products and their delivery from
real prospect of shortages continue to loom in the market.
manufacturer, to distributor, and ultimately to installation
site, the steady price increases of oil and gas are difficult
for the industry to absorb. The U.S. Energy Information
Administration (EIA) suggests that higher crude oil prices
2007
Crude Oil Price/Barrel
and higher refiner margins are leading to higher prices
Also contributing to price increases is a reduction in
2008
2009
2010
Oil
for fuel. Analysts predict diesel prices this winter will be
global mining of fluorspar, a key raw material used in the
$3.14 per gallon, up .35¢ from a year ago. Barrel prices of
manufacturing of FEP. Plus, prices for all fluorine based
2
180.0
previously reported in issues of “The CSC Market Brief.”
months, in late 2010.
electronics, photovoltaic, military, oil and gas – as well as
190.0
cabling products. Rising PVC prices and other plastics
announced a rapid round of price increases within two
is due to increased demand from other industries, such as
200.0
component of jacket and conductor insulation for
The two remaining FEP producers, DuPont and Daikin,
products have risen dramatically in recent months. This
210.0
oil price increases. Oil is used to make PVC, a key
FEP:
FEP is a fluoropolymer used in the production of
220.0
a post-recession rise since January of 2009, mirroring
in China, analysts predict copper prices will continue to
Capitol Commodity Services in Indianapolis estimated
230.0
The price of polyvinyl chloride (PVC) has been on
$3.75
$3.50
$3.25
$3.00
$2.75
$2.50
$2.25
$2.00
$1.50
the economic recovery in the U.S. and overseas, especially
Businessweek magazine, Lannie Cohen, president of
PVC:
Average Monthly price of Copper per pound (lb)
$4.50
$4.25
$4.00
Due to market dynamics, including increased demand of
rise even higher in 2011. In the Dec. 5 issue of Bloomberg
Economic News for Customers and Friends of CSC
Q1 2011 The CSC Market Brief
Analysts Estimate
oil, which topped $145 in 2008, then dropped by half that
in January 2009, have risen steadily ever since. The EIA
THE IMPACT:
expects prices to be in the $90 range by the end of 2011,
The stress higher demand places on the FEP marketplace, coupled
with a production contraction, have resulted in higher prices for
this key component of wire and cable products.
a steady increase.
3
THE IMPACT:
The trucking industry carries 70% of all freight in the U.S. Often when
gas and oil prices increase, shipping companies will pass along the
costs as percentages or surcharges on delivery of product.
Economic News for Customers and Friends of CSC
Q1 2011 The CSC Market Brief
Q1 2011 The CSC Market Brief
Servicing You With Knowledge I Rising Material Costs Greet 2011
CSC - Keeping You In The Knowledge Loop
In the short time since “The CSC Market Brief” last appeared in October 2010, raw material prices have continued to
dramatically escalate. National publishers including Bloomberg Businessweek and The Wall Street Journal, along
with many of the industry leading manufacturers working with CSC, are reporting a similar story: as raw materials
increase, so does the cost of manufacturing, and therefore prices. This issue of “The CSC Market Brief” seeks to
provide knowledge about:
Bottom Line Wrap UP:
Rising raw materials costs have created a perfect storm for cable
suppliers forcing incremental Q1 price increases on top of the
increases set forth in late 2010. The unfortunate truth is these
price increases are hitting us all, and the best thing we can do is
to communicate, educate, and work together to ride out this latest
storm. Our manufacturer partners are doing everything in their
power to steady prices. This includes analyzing the most efficient
utilization of manufacturing capacity, studying cost reductions and
containments, and evaluating new raw materials, processes and
ideas. At the same time, we are confident they will continue to
maintain the high quality products and services they have delivered
for decades.
• How the rapidly increasing price of copper affects the prices of network cabling
and data center infrastructure solutions
• How FEP, PVC and oil prices impact manufacturer pricing
• The business challenges surrounding these important products and technologies
As your unbiased industry resource, CSC wants to insure that you are armed with information as you execute your
organization’s 2011 business plan. We hope the following is helpful and encourage you to contact your local CSC
representative if you have any questions, concerns, or require additional assistance.
Sincerely,
Frank LaPlante
The Outlook for 2011: The Perfect Storm
While the U.S. gross domestic product is expected to increase
steadily in the coming year, and a double dip recession seems
to have been averted, the wire and cable industry has experienced
CSC is making every effort to secure long term commitments
from manufacturers to keep costs as steady as possible.
For more information please contact your local CSC representative.
dramatic, across-the-board increases in raw material costs. In the
past, when one of these raw material costs spiked, the industry
was able to absorb the increase. However in 2010, the industry
saw a multitude of raw material price increases taking place at the
same time -- making it impossible for manufacturers to absorb
200 East Lies Road • Carol Stream, IL 60188 • 877.462.7279
the increases and operate efficiently. This “perfect storm” of raw
material price increases is expected to accelerate in 2011. Although
this creates a challenging business climate, CSC’s commitment to
you remains steadfast: provide the industry’s most robust products
and services portfolio while keeping customers ahead of the latest
market trends so you can make better informed decisions.
4
© 2011 Communications Supply Corporation
1
Vice President, Sales and Marketing Communications Supply Corporation