More than lumber: building materials are causing price spikes

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At BORGA Steel Buildings and Components in Fowler, a shortage and doubling in the price of steel has limited the number and types of projects the company is able to bid on. Photo by Frank Lopez.

published on May 19, 2021 – 1:36 PM
Written by Frank Lopez

With so many businesses in different industries facing either temporary shutdown, downsizing operations, dividing shifts, and / or downsizing work teams in the wake of the pandemic, contractors and manufacturers have been experiencing supply chain issues. supply.

According to an October 2020 survey by Interos, a third-party risk management platform, 43% of 450 senior business decision-makers in the United States said their entire supply chain had suffered some kind of disruption, ranging from supplier price fluctuations, security restrictions slowdown or suspension of orders, the need to find suppliers in other regions due to import and export restrictions and bankruptcy providers.

BORGA Steel Buildings and Components, a Fowler company that manufactures steel buildings, roofs, solar structures, roofs and components for the commercial, industrial, agricultural and residential markets, has experienced a shortage of steel since the beginning. of the pandemic last year.

As of December, the price of hot-rolled steel sheet had doubled since early August to a two-year high of $ 900 per tonne, according to S&P Global, an energy market intelligence source and raw material.

Ron Heskett, CEO of BORGA Steel, said the company gets most of its steel from steel mills, but with a reduction in material availability, steel mills are now putting all of their customers on allowances, which means buyers won’t can buy that amount in the quantities they offer.

“Even though I need more, I can’t get it. I have to go to the secondary market, and if I go to the secondary market and buy from a broker, it’s 40% more. It was difficult and delayed some of our projects, ”Heskett said.

Heskett said he has seen a significant increase in steel prices, with some materials increasing by up to 95% since the end of 2020.

The steel mills expected at the onset of the pandemic, when businesses were closed, that there would be a drop in demand, so the steel mills slowed production.

The exact opposite has happened, Heskett said.

There has been an increase in demand for commercial, residential and government buildings.

Factories are trying to catch up with production with demand, but it will take time.

Heskett’s suppliers tell him that steel prices will flatten out at the end of the year, but he doesn’t hear of any significant drop in prices or prices even approaching what they are. were previously.

With current high lumber prices, Heskett said steel is entering markets traditionally dominated by lumber, such as the agriculture industry. Steel construction for the envelope of buildings is becoming more and more popular as the prices of plywood also increase.

Heskett said plywood has gone from $ 17 a sheet to $ 82 a sheet, adding thousands of dollars to the cost of building a home.

With the steel allowances from the factories, Heskett said BORGA cannot even bid for some products because they don’t have the steel. There are even larger companies that contact BORGA to buy steel from them.

“I think we’re going to see additional demand as it looks like we’re coming to the end of the pandemic and it’s going to restrict the lead time for materials for a long time,” Heskett said.

Brandon Cooper, president of Beam and Company, Inc., a Fresno entrepreneur specializing in commercial and multi-family projects, water maintenance and mold, said that after the onset of the pandemic, and with more than people working from home, the maintenance side of the business experienced a drop in demand as there was no one in the buildings to report a problem.

With so many projects delayed last year and finally starting this year, there is a strong demand for an already low supply of resources and materials. There is a “jam of projects”.

At the start of the pandemic, there was a shortage of many supplies needed for construction, such as doors and insulation, and with supplies this low, costs have skyrocketed, Cooper said.

Cooper said that overall there have been 300-400% increases in material prices.

“I get letters from my suppliers at least once a week advising us of immediate material increases, making it harder for the builder,” Cooper said. “We bid six months ago for a project where the lumber price was 150% lower. We have to do the same project today, but who is going to eat the difference?

However, even with negotiated contracts and fluctuating prices, Cooper said clients understand the situations caused by Covid-19, and contractors and clients are working together to move projects forward.

Cooper said the company has gone from very little work to be done to an “incredible” amount of work, and projects that normally take a week can take around six weeks.

“Talk to any builder and they’ll tell you the same thing. They’re going to be buried in labor, ”Cooper said.

The pandemic has not only delayed supply lines for building construction, but also reduced demand for devices and accessories.

Paul Chamberlain, CEO of Linmore LED, a high-performance LED lighting and wireless communications solutions company in Fresno, said the company saw a decline in business due to lower demand for its products during the pandemic.

However, the shortage hit the company last month.

There is a shortage of components inside the drivers – silicon chips and capacitors – and even though it is only a few parts with the shortage, Linmore’s products cannot be supplemented with missing parts. .

Chamberlain said that over the past four weeks there has been a dramatic increase in prices and component delivery times are four times longer than they used to be.

The impact will be felt in the months to come, Chamberlain said, as orders are delayed and the company could see a shortage of materials, not be able to fill orders, lose orders and possibly even reduce hours if there are no components to build orders. with.

“We are placing more orders and larger orders to fulfill,” Chamberlain said. “At the end of the day, we’ll end up increasing our inventory even though we already have quite a bit of it. Instead of projecting eight weeks in advance, we are now projecting four to six months in advance.

Along with supply shortages, there are also increases in transportation and other costs, which led Linmore to execute its own price increases in mid-March, and discussions are underway for a second price increase in July.

With an increase in prices, customers are more likely to wait to make purchases, which ultimately hurts everyone in the industry, Chamberlain said.


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