Supply Chain Issues in Building Materials Continue to Mount

Just as we all started to jump for joy over vaccinations arriving, returning to work and the economic recovery, the building materials world, and the whole world for that matter, got wholloped again. The supply chain ran into a wall of issues that basically shut off the spigot to some commodity and specialty products that we were bending over backwards to sell just months ago.

What happened?

 

The Imperfect Storm

Texas got crushed with cold weather, and while some looked on from afar, in the local communities the electric grid went down, shutting off power, bursting pipes and damaging plants and facilities across the state, and those around it.  This “snowball” effect was crippling to the oil and gas industry, and also the chemical industry, upon which the building industry is largely dependent.

How dependent?  Well, large companies like Dupont, Ineos, BASF, ExxonMobil and many others supply the base chemicals that go into plastics, composites, glass and other items, which we consume in massive amounts in our everyday goods.  Resins are the base materials in building products like solid surface and quartz as well as laminates and many other surfacing materials.  Likewise, carpet also uses polymer based fibers in its construction.  All of these base materials are facing supply chain disruptions as these chemical companies enact Force Majeure, citing acts of nature crippling their businesses.

 

Lumber to Renumber

Prices have skyrocketed in the wood world, with softwood lumber prices increasing 75% to 150% according to multiple sources, as quarantined communities decided to build add-ons, upgrade spaces or take on oft neglected projects now that they are relegated to hearing their spouses complain about them.  You have time now, don’t you Larry?

Tight supply and strong demand already existed pre-pandemic. The recent shutdowns and labor shortages have only exacerbated these problems.  Add Larry and his new deck to the mix and the problems are compounded, as are Larry’s if he doesn’t get that deck built.  Looks like a doghouse may also be on the honey-do list.

Glass Half Empty

Sadly, not all the vaccine news is great: glass manufacturers are  stepping up to make vials like they are going out of style, putting a huge strain on the glass industry. The base material, borosilicate glass has been diverted to the medical industry, and the construction world is suffering as a result.  Schott Glass has said it has been asked for over 1 billion vials for vaccines, and with that number being repeated annually, it is no wonder that buildings are sitting mid-construction waiting for glass to arrive.  Similarly glass fibers, like those used in fiberglass insulation, are supply constrained due to glass supply chain issues and increased home construction (unfortunately, not due to the fact that they are an irritant and inferior to other fibers like wool).   There has been a call to action in the sand industry that started years ago when people called attention to the fact that we were running out of the grade of silica sand needed for the glass industry.   Life might be a beach, but running out of the sand will be a beach of a problem. It is not the same sand you scoop in the Sahara, and it is getting frighteningly more scarce.

Peddle to the Metal

Steel and aluminum prices have also increased dramatically, meaning framing studs and rebar prices are not immune to the increases.   There is a lot of demand for metal in industries like automotive as well, so even though a lot of metal is recycled, a bounce back in demand post-Covid means that a lot of the high volume consumer industries will increase demand but could take a front, or backseat to other markets.

Ship Show

Go to any port and you will see container ships queued up to be unloaded.  All the materials that we complain about coming from China–but are ordered by the billions–are stuck in an oceanic parking lot waiting to be unloaded.  The container ship back up, due to labor shortages, lack of curbing shipments due to Chinese New Year and general infrastructure needs, is not just affecting the building materials industry.  These are the precious capsules needed back overseas to refill and ship us our goods, be it wine from Italy, furniture from China, clothing from India or recently knuckle-rapped transloaded quartz from Vietnam.


What the Truck?

Where’s my stuff?  Even Amazon’s trusty two day delivery became laughable as Covid relegated us to our homes and everyone started getting really friendly with their clicks, ordering whatever seemed to be absolutely necessary in the given moment.  Suddenly, the demand for delivery services shot up, as did the volume of online orders needing to be transported by large delivery trucks.  More orders, more trucks.  Straight math.  Compound this with an issue that was already simmering–decreasing numbers of long haul truck drivers–and the end of 2020 saw freight rates rise even higher.   The political posturing of the post office led to defunding which caused even more delays.

Enter 2021, which has already seen a decent increase in diesel pricing and a recovery in retail demand thanks to a year of discretionary funds saved on travel, and you have quite a concoction.

More traffic, fewer drivers, higher demand and increased fuel pricing–that’s a trucking disaster.

Wrap It Up

We certainly have some challenges ahead, but we just dealt with 2020, so we’ve got this.  But don’t be surprised if prices continue to creep up, delivery is delayed or you just can’t get what you need.  Keep an eye out, make backup plans, and be safe.  This too shall pass.