Ongoing Construction Material Shortage in 2021: Here’s What Happened
One of the most pressing issues in the industry right now is the ongoing construction material shortage in 2021. Here’s everything you need to know.
“Wait, how long will that take to get here?”
“Why is this product way more expensive all of a sudden?”
If you’ve bought almost anything lately, you’ve noticed prices higher and wait times are longer. Something is going on with supply, demand, and transport in the US and around the world.
Why are home build and construction prices so high right now? What’s contributing to the construction material shortage? How long will it all last?
Keep reading to find out why construction companies are having issues getting and moving products and what you can do about it.
The cost of construction materials has a lot to do with overall construction costs. Lumber is a necessity for many construction projects like residential, commercial, and other structures.
Before the pandemic, lumber averaged $350 to $500 per thousand board feet. In May of 2021, prices soared to an all-time high reaching just over $1,500 per thousand board square feet. Since that time, lumber prices have dropped to just under $500 per thousand board square feet.
When construction companies are forced to pay more for materials, they pass that cost to consumers. Just because lumber prices are at a simmer now doesn’t mean they’ll stay there. As long as lumber prices are pogo-sticking around, the construction industry may count on higher costs for the foreseeable future.
In 2018, President Trump implemented tariffs that affected steel imports to the US. President Biden has kept those tariffs in place. As steel demand has increased, supply has not.
The supply problem was compounded by pandemic factory shutdowns in China and the US. Since China provides a lot of the world’s steel, this hiccup has resulted in a global steel shortage.
Much like lumber, steel prices are currently higher than previous national averages. Demand for steel has increased while supply has decreased. This inverse relationship is costing builders and consumers more.
The higher the price of steel, the more it costs those using it. Larger-scale projects are seeing that increase as well. This means cities and counties need to pay more for their infrastructure projects.
Most of the time, this additional cost will get passed on to the taxpayers.
Sixty percent of construction workers laid off during the great recession did not return. The industry is looking at a similar trend after pandemic layoffs. April 2020 saw over 10% of construction laborers laid off or discharged.
Between July and August of 2021, the construction industry said goodbye to 3,000 workers. Contractors are still searching for qualified workers to fill those jobs. Over 70% of firms reported underqualified job candidates applying for their open positions.
The result? Project delays and longer lead times. As many as 57% of firms are reporting delays in their delivery as a result of worker shortages.
This is just one piece of a complicated puzzle. Here are some other reasons the construction industry is seeing a labor shortage right now.
Many lifelong construction employees are retiring. Those who have been working in the industry for over twenty years may be retiring for medical reasons. Others are simply reaching retirement age.
The number of individuals retiring is outnumbering those entering the workforce right now. This means there are more positions than qualified candidates to fill them.
In 2020, over half of families in the US spent at least $10,000 on childcare costs. Things became tighter after COVID-19 lockdowns. Many parents quit their jobs to stay home with their children.
The post quarantine childcare situation has not improved. An estimated $12.7 billion in business revenue has been lost due to childcare issues. With limited availability and soaring costs, some hourly wage workers are opting to stay at home with their children.
The current shipping crisis isn’t helping with construction materials shortages. Major ports are experiencing crisis-level congestion. Land transport units are experiencing availability issues as well.
It’s not just an American issue, either. As supply in the US increases, fleets are having issues with ports and international transportation.
The freight industry is experiencing a debilitating combination of congestion, lack of resources, and mishaps. Factors out of industry control have combined to create an expensive and frustrating situation. Natural disasters and a Freightliner stuck in the Suez Canal are just a few.
Remember the pandemic toilet paper shortage? Retailers had plenty of TP in supply. But when Americans heard it was in short supply, everyone started hoarding it.
The same could happen with the steel and lumber industries. If construction companies think there won’t be enough, they’ll buy as much as they can. Since the demand is there, they can afford to get it.
What will this do to the prices? Probably keep them high and artificially inflate the demand.
The construction industry took a hit during the US’s great recession. Demand decreased significantly and without much warning. This caused some lumber producers to scale back on labor and materials.
The economy eventually rebounded and the construction materials market hit an equilibrium. Then, without time to prepare, the country shut down.
Enter a Global Pandemic
Without warning, supply chains were interrupted. Demand for building materials skyrocketed as the population’s focus shifted to home improvement. Many professionals are still working from home 18 months into the COVID-19 pandemic.
Pair this sudden demand increase with an equally sudden production halt. Many countries’ construction materials production slowed or even stopped for some time.
Add international and cross-country transport issues and you’ve got yourself a material shortage.
Over the last two years, the US and Canada have seen a lot of wildfires. These fires had an impact on two major needs of the construction industry.
Charred and burned wood cannot be used for construction projects. Thus, the lumber shortage is further fueled by these wildfires.
Transportation is also affected by national fires. Lumber trucks can’t pass through areas that are burning. This adds to the already stressed transportation system affecting the construction industry.
Who Is Impacted?
The labor and material shortages are impacting more than just construction workers. Take a look at who is paying the price for materials and supply chain issues.
The DIY Enthusiast
Have you walked down the aisles of your local hardware store lately? If so, you’ve probably noticed two things. They don’t have as much inventory and everything seems to cost more.
Fixer-uppers and skilled hobbyists are noticing supplies in short demand. They’re also paying more for materials.
Large-scale projects are now more expensive. The lumber and steel industries themselves are feeling the same squeeze as everyone else. Warehouses, commercial buildings, and shipping containers are more expensive to build now.
Because they don’t have the same buying power and storage facilities, small businesses often aren’t a priority for material distributers. This means they’re feeling the pinch more than larger companies.
Small construction outfits are paying a premium for being small. Consumers will likely feel this more with residential home builds and smaller-scale projects. It’s costing everyone more money and things are taking much longer than they used to.
Large Construction Companies
Large companies have the advantage of buying power. This helps when ordering large quantities. However, if the materials don’t exist, they can’t be bought or sold.
Large construction companies are also experiencing the effects of transportation issues. Moving large amounts of lumber and steel is a lot more difficult than it used to be. In the end, someone has to pay for it and large companies aren’t immune to that.
Does This Construction Material Shortage Have an End?
The pandemic effects on all industries are still fresh. Optimists are hoping prices and supply will level out soon.
Projections for material and labor demand remain high. People won’t stop building and improving their homes any time soon.
Shipping and transportation issues are expected to level out by mid-2022. Nobody can guarantee, but experts are hopeful for changes within the next year.
What Can You Do?
So how does all of this affect you? If you’re planning to build a house it may be a good idea to hold off until supply and demand catch up to one another.
Smaller-scale DIY projects aren’t affected as heavily. If you’re planning something with just a few materials your impact will be small. You may want to go ahead and build that treehouse or table you’ve been planning.
If you decide to build a home or large project, make sure you’re not locking in high prices long before the build. Research market averages and make an informed decision before signing contracts.
Find What You Need
If you need materials, know where to look. Ask similar businesses and colleagues who their suppliers are. Staying informed is a must when dealing with fluctuating prices and a construction material shortage.
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