Dennise Williams, Staff Reporter
HORNE
CONSUMERS ARE now benefiting from a supply crunch in the hardware industry, according to executives at ARC Systems, one of the island's largest manufacturers and distributors of building materials.
The sector is facing a double-edged sword of higher input prices and stiff competition that prevents the full impact of inflation from being passed on to customers.
Deanall Barnes, purchasing, finance and investment manager of ARC, explained that the industry has been one of the indirect victims of hurricanes Katrina and Rita.
"The hurricanes sent up the cost of oil, which immediately sent up our freight cost," he said. Many products are sourced from the gulf coast of the United States.
CURRENCY REVALUATION
Additionally, there has been a revaluation of the Chinese and Brazilian currencies against the U.S. dollar. Goods such as plywood and nails are bought from these countries in U.S. dollars, which are now worth less.
"Our overall costs have gone up," he said. "Many factors have come together against the hardware sector."
In the usual course of business, this would have resulted in a hike in the cost of building materials. But in the aftermath of Hurricane Ivan in late 2004, the hardware sector overestimated the damage that Jamaica sustained and overbought materials.
That excess inventory has carried over into this year and still has not been cleared off.
Mr. Barnes states, "We at ARC, and I know the rest of industry, have several months of stock put down. And because we have a decent stock of inventory, we can't price the goods at
replacement cost."
Even Hardware & Lumber faced a similar problem that was reported by the company in the early part of the year.
The winner, so far, has been the consumer.
OIL PRICE INCREASES
Chief executive officer of ARC, Norman Horne, said, "With the exception of cement, last year, building supplies cost eight per cent more. But this year, the market has been soft. So despite inflation and oil price increases, the prices have not been on an upward trend."
Mr. Horne said that all things being equal, prices in the hardware trade should be 15 to 18 per cent higher than current levels.
Of course, not all the news is bad at for the hardware merchants. There are some very large projects under way or about to start that will absorb some excess supply.
Mr. Horne says, "What is good is that the Spanish are building hotels and Jamalco will be expanding their bauxite operations. These projects are not in full swing yet, so we should see the numbers picking up."
And the focus isn't only on the mega-projects. Individuals are also building and renovating on a substantial scale.
