What The Tech? Steel Yourself

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    By Jim Knapp

    1

     Many equipment manufacturers announced their annual equipment price increases last Fall. Most of the increases were in the 2-5% range. This is a pretty typical price adjustment that happens every year to catch to inflation.  On March 8th the U.S. government announced trade tariffs. A 10% tariff on aluminum imports and a 25% tariff on steel imports.  On April 3rd the Office of the U.S. Trade Representative proposed an additional 25% tariff on a wide range of imports from China.  Included in that list are iron, stainless steel, boilers, heat exchangers, compressors, and instant water heaters, to name a few. The effect on the trades could be a double whammy that causes unanticipated price increases during 2018. 

    The U.S. imports about 30% of the steel that it uses and 90% of its aluminum. We can expect prices of products made with both to see an increase in price this year. Accurate predictions are impossible, but people that watch this sort of thing are suggesting prices on equipment and parts using these materials should rise between 5% and 10% as a result of the new steel and aluminum tariffs. Nortek and Aaon have already announced price increases 6% and 5%, respectively, this Spring. 

    steel-1

    The amount of imported equipment from China has slowly increased over the last few years, especially window air conditioners, PTACs, boilers and ductless split air conditioners.  Even though imports are a fraction of all the equipment purchased, a 25% increase on imported equipment could have a ripple effect on all equipment prices. If we import less equipment this year (because of the higher prices), that will put inflationary pressure on all the equipment that is made in the U.S. Manufacturers and suppliers usually respond to increased demand by raising prices. 

    Many of us have gotten used to the very stable pricing of the last two decades. It’s been easy to quote work without worrying about price changes. Even though an equipment price increase of 5%, 10% or even 15% isn’t the end of the world it might be worth it to put an expiration date on any repair or installation quotes that you do this year. That way you won’t get caught with an old quote that will be a money loser even before the work begins.

     

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