More price increases

[D_W]

my ol dad said when prices get to high stop buying......
if we all stopped buying ply etc for 6 months the prices would come down.....??
slightlydif.....
our last summer in France we noted that small toms were almost €12 per kilo and not even vine grown ones....
Most didn't buy and they got binned.....
luckily for us home grown toms are avail from April....now we actually bin toms as wqe have to many and can't give em away as EVERYBODY has too many....what a mad world.....

Last time I checked here, 1/2 ply no better than shuttering was over €65 per sheet + Tax....

This is a case where ceasing buying would cause them to come down very quickly as the futures for supply here are way down, but the spot market isn't following them yet (spot wholesale is, i'm sure, but retailers are harvesting the margin for now while they can get away with it).

Businesses here will generally increase the spot goods to match futures prices, but they will cling to the spot market any time it's higher even if they have no need to, and then hold on yet a bit longer when spot and futures are both down on the claim that they have to recover inventory cost. They'll say this about goods that they have that are low turnover that weren't changed or refreshed during an entire cycle, too, which is interesting (e.g., a bin of specialty or millwork wood parts that turns over once a year or two but is high margin).

The trip back down leads to interesting things - especially if the timing of the price declines isn't matched. For example, rough construction lumber here is more expensive than some finished or treated products of the same type. I suspect the retailers choose which items they think they can snag you on (OSB/plywood/2x4s here) vs. others that don't sell well when bought for cash projects (outdoor wood bits). Or to be more clear, the interior supplies are more often being used on something where someone is taking a loan - renovations, etc, contractor work.

 

[D_W]

Speaking of taking advantage - and the loan thing. It's always fun to burst the bubble of people who come over and talk of the cost of adding "the soft close option" to stuff in the kitchen (I built my cabinets).

That's another good example of things that are expensive when they can just be rolled into a loan, but people would look a little harder if they were paying cash.

"yeah, it's almost $4 a cabinet more for the soft close hinges if the hinges are made in western europe and not just whatever cheap junk home depot is carrying at the time"


"WWHHHHAATTT? we paid $3k extra for soft close!!!"

"do you have 100 heavy soft close drawers? that could be close to $3k extra for the soft close slides".

"NO!! we don't!"

 

[doctor Bob]

my ol dad said when prices get to high stop buying......
if we all stopped buying ply etc for 6 months the prices would come down.....??

Problem is business can't stop and they far out buy the hobby people.

 

[sploo]

I've just ordered £5000 of MDF, mental.

Just the two sheets then?

 

[Spectric]

But at what point will the price rises start to make customers wait and delay having things on their wish list. Yes many businesses can swallow some of the increase but that just eats into your profit margins, but then I suppose so long as you make something so you are keeping the company going along with the workforce and their skills then it is just a case of riding the storm until things settle down.

 

[andys wood shed]

I’m now more concerned about being broken into and having my timber stock stolen than my tools

 

[D_W]

I’m now more concerned about being broken into and having my timber stock stolen than my tools

It would definitely be a bad time to leave a nicely stickered pile outside just waiting to be stored in the next several days.

And it wouldn't be the average citizen snagging the goods, but rather a roving contractor.

Something similar became common here with lawn service folks (stealing leaf blowers and string trimmers off of service trucks with keys left in them and not stealing the trucks). It's now uncommon to see a lawn service truck that doesn't have locking holders for ancillary equipment.

 

[D_W]

But at what point will the price rises start to make customers wait and delay having things on their wish list. Yes many businesses can swallow some of the increase but that just eats into your profit margins, but then I suppose so long as you make something so you are keeping the company going along with the workforce and their skills then it is just a case of riding the storm until things settle down.

It's already happening here, but with the low interest rates, house prices have gone bonkers. My house's value has gone up 25% in the last two years, which may sound like nothing to someone in England, but there are no zoning restrictions here and my house is no prize. When I bought it, it was 2x my income. I have "leveled up" at work three times and now it's still 2x my income, which is horrifying.

Point of that being while contractors have jacked up their estimates sometimes 50% to slow down calls (but they're still fully subscribed), the increase in home equity and cheap rates has people taking additional loans to have their houses modified. They only care about their monthly payment so the cost of the work goes up further.

Example - BIL has a very nice house, but the person who had it built left the garage option standard. It literally allows one foot in front and one behind a minivan, and about 10 inches of room for each mirror when backing out. He's got three kids and wants room for more than just two cars, so he got a quote two years ago to have the garage extended and the top finished out into an additional bedroom. His bid (this is just frame and siding) two years ago was about $60k. He knows nothing about building, but insisted it should be under 50k. Through misunderstanding of the birds and the bees, his mrs. just had another baby. Now it's go-time - space needed. Three bids this year. All well over $100k. The contractors are just too busy. If the equity can almost double the bids for relatively routine work in two years, there's still plenty of room to buy wood.

 

[Jameshow]

Yeap with builders booked up over a year in advance timber prices will remain high as the clients will simply have to pay the prices that the builders demand or they loose their build slot....

Cheers James

 

[RobinBHM]

Problem is business can't stop and they far out buy the hobby people.

Sheet material in a kitchen probably only amounts to £1k on a £30k kitchen….so paying another £30 a sheet is of no consequence really.

 

[D_W]

Yeap with builders booked up over a year in advance timber prices will remain high as the clients will simply have to pay the prices that the builders demand or they loose their build slot....

Cheers James

An interest rate rise would probably solve it all at once, because the entire market cohort relying on increased house prices would drop out at once. At least in the states, that's the case.

If the banks are less savvy there about offering to roll an old loan, other debt and more bits added onto the house into one, I'd be surprised (especially with the appreciation in value that's occurred there in the last 20 years).

 

[Phil Pascoe]

An interest rate rise would probably solve it all at once ...

The bank my wife works for (an upmarket one - few of their customers are only £millionaires) has been warned to expect negative interest rates.

 

[doctor Bob]

Sheet material in a kitchen probably only amounts to £1k on a £30k kitchen….so paying another £30 a sheet is of no consequence really.

It's not £30 a sheet, it's an increase of up to £60 a sheet, plus timber increase, hardware, it's proper mental, overall probably averaging 50% more on material costs and still rising.

 

[Spectric]

Having spent five grand on MDF and probably being a known customer with a record for spending did you not get a good deal or special price, or would it be a case of you did and it was still 50% up even to you? Also was it bog standard or medite / moisture resistant.

 

[D_W]

When the price is futures and wholesale contracts, and the underlying wholesale prices triple, there's no deals to be had. 2x4s here went from $3 to $8. The market for whitewood went up something like 4 to 6 fold at one point because there was supply constriction and then traders got in on it.

the positive thing about the futures market is that when a supply constriction is seen coming, producers can lock in a counterparty and invest and try to increase supply. The negative thing about it is that it's subject to speculators who will be unreasonable counterparties. I'm sure some traders have lost a ton trying to get in on the run up (the futures here are now lower than they were before the runup)

 

[D_W]

Sheet material in a kitchen probably only amounts to £1k on a £30k kitchen….so paying another £30 a sheet is of no consequence really.

to make cabinets for a relatively small kitchen, I used 2A faced cherry ply and used 13 sheets. that's for 10 cabinets. I'd consider 20 cabinets to be a large kitchen or a medium large kitchen with an island. 10 years ago, the ply cost was $1400 ($100 a sheet - ended up with an extra one).

While those sheets may not go along with the install, they're in the cabinets (and the cabinets will be marked up for the sheet cost plus margin. Nobody is going to add $1000 to the cost, tie up capital, customer support, etc, and increase the price of something by that. It probably increased the cost of kitchen cabinets on the spot market by several thousand dollars for a kitchen.

But counter to that is the crazy run up - a 2 floor house here with three rooms downstairs and four up and only about 1600 square feet total is $400k now. 10 years ago, the same house would've been $230k or so. So the folks who live on loans their whole life will be glad to see the opportunity to borrow against appraisal and if a $30k kitchen job goes to $40k, they will probably still do it.

if they're working from home and think they need another room and the house equity is up +$100k, a builder and bank will tell them that the equity will go up another $70k for a $100k room add on project, and they'll do that, too.

 

[doctor Bob]

Having spent five grand on MDF and probably being a known customer with a record for spending did you not get a good deal or special price, or would it be a case of you did and it was still 50% up even to you? Also was it bog standard or medite / moisture resistant.

Yes I get good prices but still mental compared with a year ago. close double on all boards and still a 40% rise on aug 1st.

 

[Spectric]

But counter to that is the crazy run up - a 2 floor house here with three rooms downstairs and four up and only about 1600 square feet total is $400k now. 10 years ago, the same house would've been $230k or so.

But who is benefitting, the only people really affected are those trying to get onto the property ladder, or gaining a property through inheritance. If you class the property as your home then does it really mater what it is worth. In the UK many who live a distance from, find London strange. Here you can pay 500K for an ex council flat, you live in a dirty overcrowded city with plenty of congestion and some earn good money but many don't so why suffer it when you could live in a nicer area, earn less but less mortage and potentially live longer. There has recently been a court case where pollution in London was attributed to a young girls death Air pollution: Coroner calls for law change after Ella Adoo-Kissi-Debrah's death.

 

[RobinBHM]

It's not £30 a sheet, it's an increase of up to £60 a sheet, plus timber increase, hardware, it's proper mental, overall probably averaging 50% more on material costs and still rising.

That’s a fair point - Insuppose all materials are going up in price.

if it was mostly just sheets, £60 increase is £1200 extra on a kitchen - it’s a fair amount but its not enough to kill a job

 

[Keith Cocker]

When the price is futures and wholesale contracts, and the underlying wholesale prices triple, there's no deals to be had. 2x4s here went from $3 to $8. The market for whitewood went up something like 4 to 6 fold at one point because there was supply constriction and then traders got in on it.

the positive thing about the futures market is that when a supply constriction is seen coming, producers can lock in a counterparty and invest and try to increase supply. The negative thing about it is that it's subject to speculators who will be unreasonable counterparties. I'm sure some traders have lost a ton trying to get in on the run up (the futures here are now lower than they were before the runup)

Isn’t modern Capitalism a hoot!!!