Once Chauncey Leggett, CWD/PI, heard a supply chain shortage might be on the horizon for the water well market in 2021, he began to closely monitor the situation.
The president of Lake Valley Well Co. in Tarboro, North Carolina, considered the input from his supplier and others in the industry before ultimately deciding in March to stock up on $100,000 in materials, including polyvinyl chloride (PVC) casing, steel casing, polyethylene pipe, and pump wire. He hopes it will carry him into the fall.
The decision seems to have already paid off thus far for Leggett, who in April saw a 47% increase per foot for 6 1/8-inch PVC casing, a 58% increase per foot for 4-inch PVC casing, and comparable increases for steel casing. Leggett’s decision though comes with some apprehension.
“It’s a balancing act to keep the cash flow flowing to where it doesn’t put me in a pinch where I’ve got all this material sitting in the yard,” says Leggett, who serves on the National Ground Water Association Contractors Section Board of Directors and usually buys materials as needed.
Due to a variety of factors causing a volatile market, many water well contractors are facing challenges across the United States. In short order, they’re facing a materials shortage, price increases on materials and fuel, extended or delayed shipping dates, and either a three-day or no price estimate on products.
“Some of the special orders we put in, it’s already taking longer to get,” Leggett says. “It just draws my job out even further to complete it.”
Price increases are being felt across other related sectors, including the construction industry.
Construction input prices rose 3.5% in March 2021, according to Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data. Nonresidential construction input prices also increased 3.5% for the month.
Construction input prices are 12.9% higher than in March 2020, and nonresidential construction input prices are up 12.4% during that span. Natural gas and unprocessed energy materials experienced the largest year-over-year increases, rising 178.3% and 96.7%, respectively. Crude petroleum is up 90.6% compared to the same time last year, while softwood lumber prices are up 83.4%.
“The price of a new home has been inflated because of the price of materials,” Leggett says. “Same with wells—but water well drillers have not reacted as quickly as some of the building sectors, and I wish they would. That goes back to having a better handle on what your costs are because they’re changing daily.”
Leggett, the past president of the North Carolina Ground Water Association, has increased his prices over the last few years and most recently did so in March to ensure a profit is made. He has five employees and has a two-month backlog of work. His company installs water wells and geothermal systems with a 2019 Epiroc TH60 drill rig.
“The majority of the companies are about my size across the country and don’t have a team that sits in the office that monitors the prices,” he says. “I end up doing it on the weekend and through the day with my supplier. I’m trying to find how much my market can stand the price I give before they call someone else.”
Fortunately for Leggett, the area he predominantly works in—The Research Triangle (commonly referred to as The Triangle and made up of Raleigh, Durham, and Chapel Hill)—is busting with new development. The Triangle, and North Carolina in general, is regularly listed in national magazines as a hotspot to do business.
“We’ve got plenty of work,” he says, “and it’s the perfect opportunity to experiment with prices. You’ve got to stay up with the rising material prices.”
—By Mike Price