In early April, Ranger Kidwell-Ross of WorldSweeper.com sat down with Brian Naftal to discuss the unprecedented increases in raw materials. Plastic resin and steel commodities are at record highs and have impacted pricing throughout the sweeping industry. Below is the conversation that first appeared last week on the WorldSweeper website.
WorldSweeper: What has happened over the course of recent times with these two commodities?
Brian Naftal: Starting about last September, the prices of these two commodities really started taking off in an upward trajectory like we haven’t seen before. In our industry, there wasn’t much reaction since in December prices usually start coming down. However, in January 2021 it was like somebody put rocket fuel on plastic and pretty much all the other commodities. Now, in April, everyone subject to the commodity markets has felt the escalation.
WorldSweeper: Has this been pandemic related, or shipping related; all of the above?
Brian Naftal: It started out as pandemic related but since then has taken on a life of its own. It seems every day there is a different reason: there’s a boat across the Suez Canal; there’s a lack of shipping containers; there is a freeze in Texas. The truth of the matter is that production went down because of the pandemic and, at the same time, consumption has dramatically increased.
The production of plastics went down because it’s a byproduct of refining. Since with the pandemic there are fewer people driving, the demand for petroleum went down. As a result, the production of byproducts went down. Look around at all the single use plastic items that are being consumed out of nowhere. Every time you go eat somewhere it involves disposable plastic items; all the PPE uses some amount of plastic – everywhere you look there’s more plastic being consumed and, at the same time consumption went up, production went down. That’s been the story of all the commodities.
Then, sprinkle in the stimulus and the investors on Wall Street who are bidding up the price of commodities on top of it being more expensive in real life. Add it all up and you have a bit of a perfect storm.
WorldSweeper: Unfortunately, the sweeping industry is a relatively small one so there is no “cavalry” that’s going to be riding to our rescue. What’s your sense of what is on the horizon?
Brian Naftal: Plastics has been at an all-time high although currently there is been a slight tailing off in pricing. With steel we are still seeing price increases and may soon be seeing an all-time high, depending upon who you are and what you are buying. The problem at this point is getting supplied. There have been terrible delivery and production issues throughout the entire supply chain, which is very weak right now. Everybody across every industry is feeling it at the moment.
I assume that, over time, all of this will straighten out. However, we also have to assume there will be a new normal in commodity costs that will continue to ripple through everybody’s purchases.
WorldSweeper: When you’re talking about there being a supply-chain issue, are you talking about producers such as yourself being unable to get the raw materials at any price or does that mean end-users seeing production shortfalls in items like brooms, brushes and other industry items?
Brian Naftal: Unfortunately, leadtimes have stretched significantly, sometimes up to 100%. Something that historically has taken six weeks to get, today might take three months. That’s because your vendor is having trouble getting their commodities, whether it’s a container coming from overseas, or mills being backed up or some other issue. Right now, the supply chain is still getting back on its feet.
WorldSweeper: One of the things we’ve learned about in the pandemic, with its many shortages, is what a worldwide marketplace we are all living in. As a result, just one facet in the supply chain can create a chokepoint with the products we want and need, because there are so many factors that go into a finished product.
Brian Naftal: We all realize how interconnected we are; it’s a very interconnected world right now.
WorldSweeper: In your opinion, what should sweeping contractors and municipal sweeping managers be doing now? Should they be buying ahead? Stockpiling? On the other hand, we don’t need shortages, and that’s what happens when people panic. However, if prices look like they’re continuing to go up, and with interest rates so low, it’s not like anyone is getting much of a rate of return on money they have in the bank. Does that make it a better investment to buy in larger quantities and stockpile a little more? How would you respond to that topic?
Brian Naftal: Three months ago I would say buy ahead and stockpile, because we saw it coming. At this point a reaction like that doesn’t make much sense because the problem is here already. What Keystone is doing is working very hard to ensure that our problems do not become an issue for our customers. We have the needed inventory of commodities, we have the supplier relationships and we are doing our best not to have our customers feel pinched like we are feeling from our suppliers.
We are doing our best to determine, on behalf of our industry, where all of the commodity pricing is headed. We may be at the top and, yet again, we may not be. At some point a new normal will set in and we will all have to recognize what that new normal is. All anyone can do right now is take a watch and wait and see approach.
WorldSweeper: As a message to sweeping contractors, I recommend that they consider how this extreme increase in commodity pricing – reflected in the wear items and other of their expenses that have increased – and, if appropriate, impose surcharges on their contracts such that they will continue to be able to make a normal profit. They need to reevaluate and perhaps, based on the current reality, redevelop their cost structures. Imposing a “pandemic surcharge,” for example, may be what’s needed to remain profitable.
It’s not in their customer’s best interest that they don’t remain profitable and able to keep their wear items and sweepers updated and so forth. The increased prices are just a fact of current life and if they need to be passed on to their customers then that’s what needs to happen.