Damato of the Day Is ... "What Goes Up Must Come Down"
A lot of folks in the building material supply chain are
holding their breath these days. The skyrocketing prices of finished petroleum
products including asphalt roofing over the past year have reached a peak and
appear to be headed for what could be a rapid downward spiral.
A lot of folks in the building material supply chain are holding their breath these days. The skyrocketing prices of finished petroleum products including asphalt roofing over the past year have reached a peak and appear to be headed for what could be a rapid downward spiral. The expectation is that prices will fall, but when, by how much, and what impact will it have on the supply chain? The “hit” may come soon, and what we are about to witness may be fairly dramatic. Or not.
In 2008, escalating prices in asphalt roofing were impacted by a combination of consolidation in the manufacturing sector, regional storm activity, plant closings, the price of crude oil, and a reduction in the availability of asphalt as a percentage of a barrel of that crude oil. This was in the face of a diminished market for prepared asphalt roofing for the important residential new construction sector.
Recently we have witnessed a precipitous drop in the price of a barrel of crude oil driven by world economic conditions. Petroleum producers will likely continue to offer up less asphalt than we might have otherwise expected, and if the federal government kicks infrastructure improvements into gear as part of an economic stimulus plan, that will have a potentially greater impact on the availability (and price) of asphalt. Storm activity typically does not play a huge role in the winter months, so there is not much happening there - and no way of knowing what we will face in 2009. It does not appear that the residential new construction market will recover in 2009 with some regional exceptions.
So what does this mean to the price of a square of asphalt shingles and the firms who make and supply it to the trade? As I said, a lot of people are holding their breath. It is a real mixed bag with a lot of pressure remaining on the upside of pricing in the face of emerging downside pressures. My best advice: keep an eye on pricing and be ready to shift gears on a dime. No way to know what will take shape, but the best bet is on change.
A lot of folks in the building material supply chain are holding their breath these days. The skyrocketing prices of finished petroleum products including asphalt roofing over the past year have reached a peak and appear to be headed for what could be a rapid downward spiral. The expectation is that prices will fall, but when, by how much, and what impact will it have on the supply chain? The “hit” may come soon, and what we are about to witness may be fairly dramatic. Or not.
In 2008, escalating prices in asphalt roofing were impacted by a combination of consolidation in the manufacturing sector, regional storm activity, plant closings, the price of crude oil, and a reduction in the availability of asphalt as a percentage of a barrel of that crude oil. This was in the face of a diminished market for prepared asphalt roofing for the important residential new construction sector.
Recently we have witnessed a precipitous drop in the price of a barrel of crude oil driven by world economic conditions. Petroleum producers will likely continue to offer up less asphalt than we might have otherwise expected, and if the federal government kicks infrastructure improvements into gear as part of an economic stimulus plan, that will have a potentially greater impact on the availability (and price) of asphalt. Storm activity typically does not play a huge role in the winter months, so there is not much happening there - and no way of knowing what we will face in 2009. It does not appear that the residential new construction market will recover in 2009 with some regional exceptions.
So what does this mean to the price of a square of asphalt shingles and the firms who make and supply it to the trade? As I said, a lot of people are holding their breath. It is a real mixed bag with a lot of pressure remaining on the upside of pricing in the face of emerging downside pressures. My best advice: keep an eye on pricing and be ready to shift gears on a dime. No way to know what will take shape, but the best bet is on change.
