Steel, roofing materials shortage hamstrings construction

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Dive:

  • The August data from Gilbane Building Company shows that prices for key materials, such as steel, and PVC pipes, continue to rise, causing delays and pushing up delivery times.
  • Prices of adhesives, drywall and electrical equipment rose. Deliveries were delayed and inventories of these materials contracted, according to the construction company. According to Gilbane,
  • Lumber saw a rapid rise in prices earlier this year. It was also one of the few materials that saw a decline. But even that may not last for long, as lumber futures have soared nearly 40% since mid-August.
  • Dive insight:

    Contractors have been forced to delay projects and use substitute materials as a result of mounting shortages.

    Steel and roofing materials are the most difficult to find right now, according to Ken Simonson of the Associated General Contractors of America. Bar joists, which are used to frame roofs, can have lead times of anywhere from 10 months to 14 months.

    Costs have also soared, with the index for steel mill products rising 123% YoY in August, according to the Bureau of Labor Statistics’ Producer Price Index. Copper and brass mill shapes jumped 45.3% YoY, while plastic construction products saw increases of just under 30% YoY.

    Prices of construction materials soar

    Producer price indexes for select construction commodity groupings, not seasonally adjusted

    “It’s a real strain to get the full project done and staying within budget,” Simonson said.

    In some cases contractors may substitute materials in order to reduce project time. Although custom beams can be used to replace bar joists (for example), they are heavier and require redesigning of other structural elements.

    While contractors may be able to save time by substituting materials, they must convince the project manager to accept a redesign and a greater expense. Simonson said.

    In many cases it is difficult to find substitutes. Simonson stated that recent extreme weather events have exacerbated the supply shortages that started with the pandemic and dealt a severe blow to the construction sector.

    The February winter storm that hit Texas in February caused the closure of plants that produce raw materials for construction plastics. Hurricane Ida also led to several weeks-long power outages at chloralkali plants, which make key ingredients in PVC pipes.

    National nonresidential construction spending fell 0.4% in August, with spending declining on a monthly basis in 10 of the 16 nonresidential subcategories, according to U.S. Census Bureau data analysis from the Associated Builders and Contractors. Anirban Basu (ABC’s chief economist) stated in a statement that rising materials costs and a lack of labor are “inducing project owners to delay work.”

    With fewer nonresidential projects in demand, contractors are mostly absorbing the higher prices. Input costs to construction rose 28% from April 2020 to August 2021, according to an emailed analysis of BLS data from the Associated General Contractors of America. In contrast, bid prices rose only 5% during the same time period.

    Various shortages and other supply chain bottlenecks are expected to last into next year, if not into 2023, said Simonson.

    “I believe it will take a very long while before we see things return to what they were before this,” he stated.

    Sarah Zimmerman
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