Denali Intelligence T&D Market Index

Denali Intelligence’s T&D Market Index is based on detailed analysis of 11 critical spend categories that represent core purchases for most transmission and distribution (T&D) organizations. Because most of these categories have experienced significant volatility during the past two to three years, Denali Intelligence’s T&D Market Index is based on a weighted composite developed from an analysis of more than 30 utility T&D spend profiles. Denali Intelligence analyzes the key cost drivers to develop the historical and forecasted price trends associated with this index.

As the recession continues, Denali Intelligence’s T&D Market Index reflects broad economic challenges but with a utility flavor. The Index ticked up slightly at 1.87 percent overall as six of 11 weighted utility spend categories showed resilience in the face of commodity price erosion. In the broader economy, second quarter 2009 was led by the pull of underlying commodities including a 39 percent increase in crude oil and a 6 percent increase in diesel fuel. Sharp decreases continued across all base metals, which retreated on eroding demand, domestic and international. A slow U.S. economy and production cuts in China continued to drive market softness in all base metals, with aluminum seeing the sharpest declines. The overall unemployment rate reached 9.5 percent in June, up from 7.2 percent in December 2008. Market forces are driving even more emphasis on corporate cost restraint, and virtually all utility T&D teams are operating in a constrained expense environment. 

As T&D costs come under increasing pressure and T&D project loads begin to slow, T&D categories will see margin erosion. Looking to the remainder of 2009, Denali Intelligence expects the T&D Market Index to reflect continued price pressure overall. The trend will be a flattening for services and a slight rise in the third quarter for materials, with an overall change on 2009 of an approximate 6 percent decrease. Additional erosion in materials is expected in first quarter 2010 with some strengthening in the second and third quarters before easing in the fourth for an overall movement in 2010 of about a 0.5 percent increase.

Denali Intelligence is a service of Denali Group and offers subscription and custom market intelligence designed for utilities sourcing professionals.

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Denali Intelligence transmission and distribution market index for 2Q09

About the Index
 
Denali Intelligence’s T&D Market Index is based on detailed analysis of 11 critical spend categories that represent core purchases for most T&D organizations, including line material, meters, steel structures, street lighting, switchgear, transformers, wire and cable, wood products, construction services, engineering services and vegetation management.
 
Because most of these categories have experienced significant volatility over the past two to three years, Denali Intelligence’s T&D Market Index is based on a weighted composite developed from an analysis of more than 30 utility T&D spend profiles. Denali Intelligence analyzes the key cost drivers — commodities like steel and copper, labor, and other cost factors — to develop the historical and forecasted price trends associated with this index.

The index offers T&D organizations a snapshot to explain budget variances for purchased materials and services over the past 12 months and gives projections for the coming year.

Summary
 
As the recession continues, the index reflects broad economic challenges but with a utility flavor. The index ticked up slightly at 1.87 percent overall as six of 11 weighted utility spend categories showed resilience in the face of commodity price erosion. 
In the broader economy, the second quarter of 2009 was led by the pull of underlying commodities including a 39 percent increase in crude oil and a 6 percent increase in diesel fuel. Sharp decreases continued across all base metals, which retreated on eroding demand, domestic and international. A slow U.S. economy and production cuts in China continued to drive market softness in all base metals, with aluminum seeing the sharpest declines.

The overall unemployment rate reached 9.5 percent during the month of June, up markedly from 7.2 percent in December 2008. Market forces are driving even more emphasis on corporate cost restraint, and virtually all utility T&D teams are operating in a constrained expense environment. 

Transmission & Distribution Market Forecast

·   As T&D costs come under increasing pressure and T&D project loads begin to slow, T&D categories will see margin erosion.
 
·   Looking to the remainder of 2009, Denali Intelligence expects the index to reflect continued price pressure overall. The trend will be a flattening for services and a slight rise in Q3 for materials, with an overall change on 2009 of an approximate 6 percent decrease.
 
·   Additional erosion in materials is expected in the first quarter of 2010, with some strengthening in the second and third quarters, before easing in the fourth for an overall movement in 2010 of about a 0.50 percent increase. 
 
About Denali Intelligence

Denali Intelligence is a service of Denali Group (http://www.denaliusa.com/market-intelligence) and offers subscription and custom market intelligence designed for utilities sourcing professionals.