As fuel and energy costs continue to rise, it’s likely the pool and spa industry will see increases in the price of cement, PVC, metals and other raw materials through the remainder of 2006.
The situation, many say, will be a repeat of 2004 and 2005, with price increases coming from suppliers on a regular basis.
“We have seen increases in chemicals, steel, cement, flex pipes, vinyl liners, aboveground pools, fuel, everything,” said Cliff Malzman, president of Cannon Recreation Corp. in Syracuse, N.Y. “We’ve tried to mitigate this by buying early. To hedge against the increases, we brought in 50 inground [package] pools and 400 aboveground pools and warehoused them.”
The price increases have been harsh: PVC pipes in Malzman’s area are up more than 50 percent; chlorine is up 40 percent; vinyl and steel are each up approximately 8 percent. Malzman said his advanced planning still won’t cover the 600 to 800 aboveground pools and 200 to 300 inground pools he predicts installing in 2006.
For most experts, the problem is primarily supply and demand. “It’s all a result of tight supplies and energy costs. Sixty-five percent of the costs of these products are energy-related,” said Rick Smith, executive vice president of Chemical Market Associates Inc. in Houston. “You had a very tight supply situation as a result of all the hurricanes last year, and there was lost production in the fourth quarter. We forecast continuing moderation in terms of prices.”
Malzman isn’t taking any chances. “We raised all our prices considerably and the market is bearing it. We’ve been able to pass the increases on to our customers and our volume has not been affected,” he said.
Yet with prices continually increasing, keeping up can be a challenge. “I’m on a three-month lag and by the time the increases come in, we’re already working on the project, so the homeowners benefit from that,” said Mike Fratrik, president of the Orlando, Fla. branch of Blue Haven Pools & Spas, a Pool & Spa News Top Builder. In the past four months, he has received three letters informing him of cement price increases to the tune of 13 percent.
“We’ve been able to absorb it so far,” said Fratrik, whose company will build 450 pools this year. “It’s a matter of knowing your business and your margins, how many jobs you’ve sold, and having a good relationship with your suppliers.”
Fratrik hasn’t seen any delays in his orders, but the Portland Cement Association said tight conditions still exist in 32 states.
“The loyal customer who has a long-term relationship with their cement company won’t have any problems,” said Ed Sullivan, chief economist for Skokie, Ill.-based PCA. “The demand keeps outstripping the ability to supply. We’re committing $4 billion to increase capacity through 2010, but most of that capacity won’t come on until 2008 or 2009.
“You’re not going to see any relief in the immediate future,” he said.