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SBS Gift Cards make shopping for that handyman easy!	Raw Materials Prices on the Rise Add increasing prices for paint to the ever-growing list of pressures that are driving up costs in the construction industry. Increasing prices – on everything from lumber and steel to concrete, transportation and insurance have been making the news, and hitting the pockets of commercial and residential builders for months. Now the coatings industry says it is faced with times like never before because of escalating raw materials costs. The answer to why raw materials costs – and ultimately the price of paints and coatings, plastics and paper – are going up is complex. In the past, oil and natural gas prices were largely responsible for fluctuations in raw materials prices. Energy prices surely aren’t helping, but they are just one of many factors that are having a direct impact on costs for raw materials that are needed to make paint. Crude oil and natural gas are the starting points for nearly all of the chemicals used to make paint as well as adhesives, plastics, synthetic fibers, electronics and nearly every product made. With crude prices 50 percent higher than they were a year ago, rising energy prices are definitely contributing to increases in raw material costs. Another piece of the problem centers around competition for propylene and ethylene, which are made from processed crude oil and natural gas and form the raw materials for many different products, including paints. As energy prices rise and demand increases, suppliers are deciding where they want to sell their product. In many cases, suppliers are choosing to produce gasoline, rather than for paint feedstock supplies. Propylene, produced in the same way that gasoline is produced, is usually stripped out of the “gas pool” and sold to other industries. But propylene also makes gas burn better. With higher gas prices, it makes better bottom-line sense to leave it in the gasoline. Bottom line: as the price of gasoline goes up, there is less ethylene and propylene available, and that drives prices higher. China and other emerging nations are having a direct impact on the problem. The country is not only demanding more raw materials, but also has a huge appetite for finished products. One example is propylene, which goes into polypropylene and is used in a variety of products including fill for winter jackets and as a structural component of computer monitors. Propylene is also the starting ingredient to produce the acrylate monomers used in super absorbent polymers (SAP) – a critical component in disposable diapers. Acrylate monomers are also used in paints. As China and other nations buy more disposable diapers, the demand for SAP is increasing, further limiting the acrylates available to make paints. Another factor in the equation is that chemical companies are spending more money to buy their ingredients, and are passing those costs on to their customers. After big drops in profits, many chemical companies are taking advantage of the demand to optimize profits and to build new plants, modernize existing facilities and add new capacity to keep up with the growing global demand. New plants may help, but will take two to four years to bring online, so they won’t be a factor in the immediate to near future. ICI Paints, Spenard Builders Supply’s paint supplier, has assured us that they are doing all they can to leverage their position as one of the world’s largest coatings manufacturers and to anticipate and react to raw materials shortages and price increases. The company says so far, they have only had to pass along a fraction of those increases, and has vowed to keep SBS informed of future developments.	Facts About China • China has the world’s fourth largest economy. • The country’s industrial output rose by nearly 17 percent in the first two months of 2005. • China is the most populated country in the world with 1.3 billion people (4 times that of the U.S.). • Infrastructure and manufacturing in China consume over 20 percent of world materials • China is the second largest oil importer behind the U.S., and economists predict consumption in China will double over the next 10 years. • Morgan Stanley estimated that in 2004, China accounted for 20 percent of the world’s consumption of aluminum; 30 percent of global demand for steel, iron and coal; and, 45 percent of the world’s cement purchases. • China will host the 2008 Olympics in Beijing and is investing money to build the most modern city and facilities possible, thus driving its demand for raw materials higher.

SBS Headlines
SBS Purchases Polar Supply Company

SBS Purchases Arctic Builders Source

SBS Gift Cards make shopping for that handyman easy!

Raw Materials Prices on the Rise

Add increasing prices for paint to the ever-growing list of pressures that are driving up costs in the construction industry. Increasing prices – on everything from lumber and steel to concrete, transportation and insurance have been making the news, and hitting the pockets of commercial and residential builders for months. Now the coatings industry says it is faced with times like never before because of escalating raw materials costs.

The answer to why raw materials costs – and ultimately the price of paints and coatings, plastics and paper – are going up is complex. In the past, oil and natural gas prices were largely responsible for fluctuations in raw materials prices. Energy prices surely aren’t helping, but they are just one of many factors that are having a direct impact on costs for raw materials that are needed to make paint.

Crude oil and natural gas are the starting points for nearly all of the chemicals used to make paint as well as adhesives, plastics, synthetic fibers, electronics and nearly every product made. With crude prices 50 percent higher than they were a year ago, rising energy prices are definitely contributing to increases in raw material costs.

Another piece of the problem centers around competition for propylene and ethylene, which are made from processed crude oil and natural gas and form the raw materials for many different products, including paints. As energy prices rise and demand increases, suppliers are deciding where they want to sell their product. In many cases, suppliers are choosing to produce gasoline, rather than for paint feedstock supplies. Propylene, produced in the same way that gasoline is produced, is usually stripped out of the “gas pool” and sold to other industries. But propylene also makes gas burn better. With higher gas prices, it makes better bottom-line sense to leave it in the gasoline. Bottom line: as the price of gasoline goes up, there is less ethylene and propylene available, and that drives prices higher.

China and other emerging nations are having a direct impact on the problem. The country is not only demanding more raw materials, but also has a huge appetite for finished products. One example is propylene, which goes into polypropylene and is used in a variety of products including fill for winter jackets and as a structural component of computer monitors. Propylene is also the starting ingredient to produce the acrylate monomers used in super absorbent polymers (SAP) – a critical component in disposable diapers. Acrylate monomers are also used in paints. As China and other nations buy more disposable diapers, the demand for SAP is increasing, further limiting the acrylates available to make paints.

Another factor in the equation is that chemical companies are spending more money to buy their ingredients, and are passing those costs on to their customers. After big drops in profits, many chemical companies are taking advantage of the demand to optimize profits and to build new plants, modernize existing facilities and add new capacity to keep up with the growing global demand. New plants may help, but will take two to four years to bring online, so they won’t be a factor in the immediate to near future.

ICI Paints, Spenard Builders Supply’s paint supplier, has assured us that they are doing all they can to leverage their position as one of the world’s largest coatings manufacturers and to anticipate and react to raw materials shortages and price increases. The company says so far, they have only had to pass along a fraction of those increases, and has vowed to keep SBS informed of future developments.

Facts
About China

• China has the world’s fourth largest economy.

• The country’s industrial output rose by nearly 17 percent in the first two months of 2005.

• China is the most populated country in the world with 1.3 billion people (4 times that of the U.S.).

• Infrastructure and manufacturing in China consume over 20 percent of world materials

• China is the second largest oil importer behind the U.S., and economists predict consumption in China will double over the next 10 years.

• Morgan Stanley estimated that in 2004, China accounted for 20 percent of the world’s consumption of aluminum; 30 percent of global demand for steel, iron and coal; and, 45 percent of the world’s cement purchases.

• China will host the 2008 Olympics in Beijing and is investing money to build the most modern city and facilities possible, thus driving its demand for raw materials higher.