Steel and roofing materials shortage hamstrings construction industry
- Shortages of key materials, including steel and PVC pipes, continue to hamper the construction industry, pushing prices up and delaying deliveries, the report said. August Data from Gilbane Building Company.
- Prices of adhesives, drywall, electrical equipment, steel and PVC pipe fasteners all rose, with inventories of those materials contracted and deliveries delayed, the construction company reported.
- Wood, which saw a rapid increase earlier this year, was one of the few materials to see a price drop, Gilbane said. But even that may not last long, as wood futures have done up almost 40% since mid-August.
Increasing shortages and rising costs have resulted in contractors delaying projects in some cases or using substitute materials where possible.
Steel, roofing and insulation materials are some of the hardest products to get right now, said Ken Simonson, chief economist at the Associated General Contractors of America. Rebar beams, which are used to frame roofs, can have a lead time of 10 to 14 months.
Costs have also skyrocketed, with the steel mills index rising 123% year-on-year in August. according to the Bureau of Labor Statistics’ Producer Price Index. Copper and brass mill molds were up 45.3% yoy, while plastic construction products were up just under 30% YoY.
Prices of building materials are rising
Producer price indices for selected groups of building materials, not seasonally adjusted
“It’s a lot of work to get the entire project done and within budget,” said Simonson.
In some cases, contractors replace materials to reduce project times. For example, custom beams can be used in place of rebar beams, although they are heavier and often require redesign of other structural elements.
“While the contractor can save time replacing materials, they need to get the project manager to agree to a redesign and higher costs, which won’t always happen,” says Simonson.
In many cases, it is even difficult to find potential replacements. Recent extreme weather events have exacerbated the supply shortages that started the pandemic and dealt a devastating blow to the construction industry, Simonson said. February’s winter storm in Texas shut down factories that supply raw materials for construction plastics, while Hurricane Ida led to weeks of power outages at chlor-alkali plants that make key ingredients used in PVC pipes.
National non-residential spending declined 0.4% in August, with spending declining monthly in 10 of the 16 non-residential subcategories, according to the US Census Bureau data analysis of the Associated Builders and Contractors. Rising material costs and labor shortages “spur more project owners to delay work,” ABC chief economist Anirban Basu said in a statement.
With less demand for utility projects, contractors are largely absorbing the higher costs. Construction input costs increased 28% from April 2020 to August 2021, according to an email analysis of BLS data from the Associated General Contractors of America. Meanwhile, bid prices rose just 5% over the same period.
Various shortages and other bottlenecks in the supply chain are expected to last until next year, if not 2023, Simonson said.
“I think it will be a very long time before we see things get back to the way they were before,” he said.
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