Americans are a pretty lucky bunch. As a rule, we are used to accessing everything we want, when we want it, however much we want, with few or no restrictions. However, even in the land of plenty, we occasionally experience issues with our supply chain. When COVID-19 hit, we knew our business would change, at least in the short term. And we weren’t wrong.
In fact, about 75% of companies in all industries experienced COVID-related disruptions in their supply chain and shipping process. And the building supplies industry has been hit especially hard.
Why is it Difficult to Get Some Building Materials?
While so many businesses slowed down during the pandemic, people were buying and selling more homes than ever, in some cases breaking home sale records.
According to HousingWire.com, 2020 was a banner year. “Existing-home sales jumped 25% to a seasonally adjusted annual pace of 5.86 million in July, NAR (National Association of Realtors) said in an August 21 report. It was the highest sales level since 2006 and the biggest monthly increase on record. According to NAR data, the prior record for a monthly gain was the 21% jump seen in June.”
Buying and selling usually mean upgrades or remodeling, and in 2020 the demand for many types of building materials skyrocketed, including lumber, insulation, drywall, and more. Rising home prices and higher home equity contributed to this boom. Stimulus dollars also provided many homeowners with extra funds to spend on upgrades.
While this home improvement boom won’t last forever, many experts predict it will continue through 2021.
Steel Supply Chain Issues
Anyone using steel has run into supply issues in the past months. U.S. steel manufacturers have been struggling to get sufficient supplies of hot-rolled and cold-rolled steel from mills. These shortages have resulted in significant spikes in steel prices. The disruptions have impacted everything from vehicle manufacturing to aerospace to ceiling grid and steel framing.
The spiraling steel prices are due, in part, to steel tariffs in place since 2018. And there is no indication that these tariffs will change in the near future. In February, Reuters reported that U.S. steel prices are 68% higher than the global market price, and almost double China’s, even factoring in big price increases from Chinese and European manufactures, now up 80% from their pandemic-induced lows.
The Pandemic Isn’t the Only Issue
Delay in the supply chain process is affecting most contractors. The U.S. Chamber of Commerce reports that 41% of contractors are reporting less availability of building products.
But the pandemic is not the only contributing factor. Wet weather and slow melts of snow are slowing down lumber production. Harvesters are unable to produce the lumber needed to meet increased demand.
February’s ice storms in Texas, and the resulting power outages, have lasting effects on supply chains. The weather and power outages shut down Texas rail traffic, critical for many supply chains across the country. Port deliveries were stalled. Suppliers are still playing catchup.
Even the ship that blocked the Suez Canal for a week in March is wreaking havoc on world logistics. While the vessel was dislodged, experts estimate that the resulting backlog can affect worldwide supply chains for months.
Is All News Bad?
While shortages are frustrating, as an industry, contractors are busy. Not all news is bad. It is expected that the surge in demand should continue through 2021 and beyond. At the same time, material shortages and pressure on prices will follow the demand curve. Several economic indicators show that short-term shortages are not stopping the U.S. on its road to economic recovery. However, the challenge will be for building material manufacturers and distributors to link supply and service levels to meet the demand.
- The healthcare industry learned some hard lessons during the pandemic. Now healthcare facilities are rethinking buildings and structures. Notably, healthcare facilities are working on reconfigured waiting spaces, wider hallways, and larger rooms to reduce crowding (and virus transmission) among patients and healthcare workers. Many facilities are updating HVAC for better infection control. Some are planning to transition office spaces to shared workspaces, conference rooms, or teleconferencing spaces. Since the beginning of 2021, 13 hospitals and health systems have already announced, advanced, or completed expansion and renovation projects with price tags of $1 billion or more.
- Although not yet fast enough to keep pace with all categories of demand, industrial production in the United States continues to climb. Production was up 1.4%in March versus February and up 1.0% compared to a year earlier.
- The race to vaccinate America continues. As of April 29, 50% of Americans had received at least one of the two shots required. As the number of vaccinated Americans increases, the economy will open up, labor shortages should ease, and pent-up demand should help the commercial building industry bounce back and grow into the future.
Metro Interior Distributors is Here to Help New York, New Jersey, Connecticut, Delaware, and Pennsylvania Contractors
The supply situation is changing day by day. Price increases are a challenge, but we predict some costs to flatten or even decrease as the world normalizes. The Metro team is always determined to help our customers find the best value for their products. Value engineering has never been more critical. We’re also committed to helping our customers get reliable deliveries on all orders placed. Contact us to find out how our team can help your business succeed in 2021 and beyond.