"The Perfect Storm" and PVC Price Increases

[Critical Care]

The following is a letter from LASCO Fittings:

"Our industry has reached 'The Perfect Storm', as it relates to dramatic changes in the Demand/Supply equation for PVC products. As shown with the recent run-up of crude oil and natural gas, we become acutely aware of:

• Increasing raw material costs
• Tight supply
• Strong global demand

VCM (Vinyl Chloride Monomer), the basic foundation for PVC resin is forecasted to double in demand over the next 3 years, worldwide. With strong growth in offshore needs, global supply relative to global demand has narrowed considerably.
Notwithstanding the supply situation, we see a sharp increase in the costs of Chlorine as well. This Chlor-Alkali chemical comprises 57% of PVC material. While, Ethylene the other basic component of PVC makes up 43% of the raw material. This ingredient is derived primarily from natural gas.
The pure economics of the PVC resin industry shows restrictive planned new facilities or expansion of existing plants. Thus a squeeze on availability for the next 18 months is predicted.

Effective 12-6-04, we will increase our PVC Schedule 40 fitting list price by 10%. Details will follow shortly. We thank you in advance for understanding an industry-wide situation."

Okay... we knew prices were going up, but now will we be passing this on to our clients? Are these increases going to affect you, or will you just shrug them off?

[Mdirrigation]

Of course you pass them on , just like increases in gasoline , insurance labor, etc.
Real estate has gone thru the roof , gas will be over 2 dollars a gallon and good helpis hard to find , once you do it is expensive to keep . I raise my prices every year .
The way I look at it , my house was 150,000 10 years ago , today it would sell for 450,000 . Ten years ago a 6 zone system was 2500.00 today its 5000.00 . If you dont raise your prices , your income will drop .

[Critical Care]

I suppose that the one thing that bothers me is how this may make me change my pricing method for installs. It could actually make someone itemize every little fitting and part that they use just so that they can justify the expense of it all to a client.

Oh yeah, and don't get me started on the gasoline topic. Smart me with my diesel! Well now, if this ain't another somebody done somebody wrong song...

[jerryrwm]

Since fittings are the cheapest items in the materials list, and assuming that you might spend $60-$100 on fittings on an average $3000 install, I don't think it would justify itemizing fittings to raise the selling price $20-$50. Besides, the time it takes to do a beginning/ending inventory and then to itemize on an invoice would cost more than the increase in fittings cost.

It's not impossible to sell an extra 1-2% on the job. Hell you could always do like one of the outfits down here do. They add a 1% "Environmental Impact Fee" as a seperate line item on everyone of they invoices. They explain it as the cost of disposing empty solvent cans and scrap PVC pipe.