UTP prices climb, but most projects expected to proceed as planned

It has been a little while since I used this space to report results from our online polling capability.

May 1st, 2004

It has been a little while since I used this space to report results from our online polling capability. Recently, we got a decent response to a question on a topic that I think is important to the cabling industry, so I will provide results and some reporting on the subject.

Here's the background: the price of unshielded twisted-pair (UTP) cable has gone up, to the tune of about 15% in some parts, since the beginning of the year. The reasons boil down to materials costs, and it just so happens that the primary materials for constructing UTP cable all have become more expensive. The three most notable materials are polyvinyl chloride (PVC), copper, and fluorinated ethylene propylene (FEP).

PVC, widely used as jacketing material for UTP and other cables, is a petroleum byproduct. Anybody who has stopped at a gas pump recently knows what has happened with the price of petroleum products.

FEP, used as conductor insulation in plenum cables, rose in price by approximately 20% around the beginning of March. FEP is available from two suppliers; both put nearly identical price hikes into effect at about the same time.

The copper price increase is more elaborate and, in my experience, an interesting tale. The world's second largest copper mine halted production temporarily after troubles at the mine, including a rockslide. Add to that fact Wall Street's expectations of about a 5% increase in demand for copper this year over last, when demand rose 2.7% over 2002. China, Japan, and North America are expected to lead the demand increases. One cable manufacturer told me that last October, copper was available for 76 cents per pound. When I spoke to him a few weeks ago, the cost had reached $1.30 per pound.

So, that meant March was coming in like a lion for sure, and I'm not talking about the nasty weather we can't get rid of here in the Northeast. Contractors and users have been paying more for UTP cable in recent weeks, which led us at Cabling Installation & Maintenance to take the industry's pulse on the issue.

We asked what this price increase would do to the cabling projects that had already been planned (and, presumably, priced). Specifically, we asked if these projects would proceed as specified; proceed with fewer drops to stay within budget; be postponed temporarily in hopes that prices come back down; or be cancelled outright.

A huge majority, 92%, said the projects will still happen. Overall, 61% of those who voted said the projects will proceed as specified, higher prices and all. Another 31% said they will proceed with fewer drops to stay within budget. Only 5% said they will be postponed in hopes of price reductions, and 3% said they will be cancelled outright.

Now, I have always included a disclaimer of sorts when reporting on these poll results, and I will do it again: We do not capture information about the people who visit our Web site and participate in our polls. I emphasize that point of caution because, for all I know, an executive at a cable manufacturer who is concerned about bad publicity may have seen the poll then sent a companywide e-mail saying, "Go to this site and vote that everything will be fine." While I don't suspect that really happened, I owe you, our readers, that explanation.

If we assume that the poll is a fair representation of attitudes across the industry, I see it through the bizarre glasses I always seem to wear—one lens rose-colored and the other lens dark and gloomy. The rose-colored lens sees 92% of respondents believing that, bottom line, business won't be hurt despite this latest hurdle. The dark and gloomy lens sees that if these numbers are correct, even some of the optimistic respondents foresee less need for labor, fewer materials purchased, and more boxes of cable remaining on shelves as prices continue to climb.

Such a schizophrenic view of the industry has taken us all for quite a ride in recent years.

I invite each of you to participate in our online polling. We always have a question on our site (www.cable-install.com), and the average duration of each poll is about two weeks. If there's a question you'd like us to pose, let me know. Otherwise, please visit the site and vote on the current topic.

Unless, of course, you intend to send a companywide e-mail to slant the results.

Patrick McLaughlin
Chief Editor
patrick@pennwell.com

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