TRG | The Bottom Line – 3/4

As the Ukranian/Russian conflict continues, crude oil prices have shot up. Crude oil prices have surged 22% YTD, rising from $91.41 to $112.52. Over the past two weeks, crude prices have increased 24% and have not been this high since mid-2014. For aggregate producers, diesel can account for 7-8% of COGs, with total energy consumption (including that to run plants) equating to 12-14% of overall costs. For more capital intensive operations such as cement plants that run 24/7, energy costs are closer to ~20%. Whether a ceiling tile producer or a carpet manufacturer, companies in the construction & industrial value chain continue to face cost management challenges, even after making significant gains in pricing in 2021 and into early 2022. An obvious statement in these times is inflation is unprecedented. What we are seeing more are “surprise” price increase letters, including feedback from a heavy materials producer sharing he received yet another price increase letter from a heavy vehicle manufacturer as the week came to a close. This heavy vehicle manufacturer, after having implemented two price increases in 4 months (late October & January), announced a menu of increases impacting orders into 2023 and a heads up to additional surcharges potentially on the way.