The COVID pandemic has hit a number of industries hard. In many of these, recovery has been slow, where it has even gotten off the ground at all. While there is always a need for repairs and new construction, that doesn’t mean that the construction industry can simply keep working through the pandemic as though nothing was changing.
One key aspect of the construction industry that’s already seeing some change is the cost of materials that contractors use. In some cases, these increases are minor, though some contractors are seeing materials increase significantly over their pre-pandemic costs. Some of these costs are barely noticeable depending on the size of your orders, of course, as material costs aren’t all rising at the same rate. For every piece that sees a relatively insignificant increase, though, you’ll likely also find other materials that have nearly doubled in unit cost.
What’s behind these increases? As it turns out, there are actually a few different things behind the cost of materials and the changes that they’re going through.
Shortages and Shipping Costs
One of the reasons behind some of these price increases is that several shortages have occurred as a result of the pandemic. The lumber industry in particular has been affected due to lumber yards and mills running on reduced schedules or shutting down to help reduce virus transmission among workers. Demand hasn’t necessarily decreased even as supplies dwindle, causing these necessary materials to increase in price as a result.
Fuel costs and the cost of expedited shipping and order processing are also driving some of these increases. This has led many suppliers to slap on additional surcharges to their materials as a means of recouping their own costs and paying for these changes to their normal shipping expenses. These surcharges add to your bottom line, and in most cases are necessary to help suppliers cover the additional expenses that they themselves face.
Managing Price Increases
There are a few different ways that contractors are handling these increased material and supply costs. Some are taking additional care with their orders, making sure to only buy what’s necessary and trying to get everything in a minimal number of orders to keep overall costs comparatively low. Shopping around at different suppliers to find the best deal on equivalent materials also plays a big part here, even if it means making changes to what and from whom you would normally buy. This puts an extra emphasis on the bid process, double- and triple-checking necessary materials and tools before placing an order.
A different approach to this involves ordering additional materials to lock in current prices and protect against possible future price increases. This isn’t always possible with specialty orders, but common materials such as lumber, fasteners and other things you’ll use on pretty much every job can be bought even when there isn’t a specific need for it. Of course, this requires you to both have the cash for a large up-front order available and warehouse space to store all of that extra material so this solution isn’t necessarily right for every contractor, either.
The Future of Materials Pricing
Unfortunately, it’s unlikely that we’ve seen the last of cost increases related to the ongoing COVID pandemic. It’s also unlikely that some of these prices will return to pre-pandemic levels even once the crisis is under control and shortages have been eliminated. Some surcharges and fees may go away, but others will likely stick around in one form or another. Shortages will eventually be made up, but that doesn’t mean that all of the prices will go down.
That’s not exactly new, of course. It’s difficult to speculate about the post-COVID world and the effect that it will have on material costs, but it’s a good idea to plan ahead and anticipate higher prices now. This will not only help you to adjust your own prices or make other changes to prepare, but it also leaves you room to be pleasantly surprised in those instances where prices do drop as shortages and other issues are taken care of.
Have you seen increases in the materials that you use on the job? Which materials have shown the most adjustments?