If You (Want to) Build it, Will Materials Come? Supply Shortage Hampers Construction

As a business, the construction industry in North Alabama is highly competitive; but as an industry, the contractors and builders are friends or, at least, casual acquaintances who come together to share ideas, discuss problems, and seek solutions that affect everyone across the industry.

When the labor shortage for instance, began affecting the industry, these leaders discussed solutions to mitigate the problem. The results were more recruiting efforts in schools, training classes, and certification programs.

But the building materials and supply shortages the industry is experiencing in the wake of the worldwide COVID pandemic that shut down the international economy, appears to have no solutions – at least not any easy ones, except to wait it out.

Make no mistake – the materials and supplies shortages in the construction and building industry are sweeping.

“In construction, we often look at raw commodities such as wood, aluminum, copper, and steel, since these components make up the majority of our buildings,” said Senior Preconstruction Estimator Brad Parker with Robins & Morton. “Currently, all of these items are affected by shortages to various degrees.

“Resins and plastics are also in short supply because of adverse weather impacts to the production of a variety of polymers and chemicals used in their manufacturing.”

Another builder said the price of oriented strand board, a common material used for roofs and siding is up 503%. He said before COVID, he could buy it for $7.50 a sheet. Now it is $40 to $50 sheet. He used to buy plywood for $7 a sheet; it is now $76 a sheet.

Joey Ceci, president of the Breland Companies said, be assured, the shortages are across the board and unrelenting.

“Forget choosing your own roofing material, you have to pick what is available and that is not much,” said Ceci. “Usually if we have a lumber shortage, we use steel studs in the walls instead of wood. But they too are in short supply. You have to order windows when you sign a contract if you want to get them in time.

“Electrical contractors are even having problems getting copper and wire, so they are going to Home Depot and Lowe’s and cleaning them out.”

And if the shortages seemed to be directed only at supplies and materials, there are many ancillary shortages causing headaches for builders.

Many of the spas people are putting in their new homes require a microchip made in China. The spas are joined by air conditioners waiting at the manufacturing plants for these chips that regulate temperature.

And appliances …

“It is almost across the board on appliances,” said Ceci. “We are finishing houses every day and the owners are ready to close but they are having to wait to get appliances.”

But Barry Oxley, executive officer with the Huntsville Madison County Builders Association, said the appliance shortage is not because here are no appliances being made, it’s because they are sitting in warehouses and on docks waiting trucks to pick them up and ship them.

Oh, those microchips!

“The shortage of microchips is one of the worst shortages out there affecting the construction industry,” said Ceci. “If you remember, during the early days of the pandemic, car dealerships were breaking records selling cars and trucks. Now, not so much because they can’t get inventory due to a shortage of the microchips in key fobs and GPS.

“Car dealerships are only giving out one key to new car and truck owners because there is a shortage of the chip in the key fob. I just saw a picture of a Ford truck plant in Kentucky with a huge lot of new parked trucks waiting for microchips.”

How do key fobs and microchips affect the building industry you might ask?

Look at any construction site. Most of the vehicles are work trucks and heavy equipment and almost all of them require microchips to control the lock mechanisms and the GPS.

And many delivery vehicles and shipping carriers use them as well, and they all come from Asia where they are under strict COVID rules and regulations.

“The pandemic, floods, fires and storms have affected the United States economy, and many of these same disasters have also affected the international business community,” said Parker. “If there is an appliance or material needed that is made in the United States, the manufacturing facility may still be repairing damage from a storm, experiencing reduced workforce, or battling other external supply issues that make them unable to produce their materials at the same rate as previous years.

“When we’re talking about importing goods internationally, not only have other countries faced similar issues, but they also have to ship their goods, and there are currently widespread challenges with transportation.”

But is COVID the absolute culprit in all these shortages, or are there mitigating circumstances as well?

“At some point supply will catch up with demand,” said Ceci. “And it is easy to blame COVID, and it is to blame to some extent, but especially in North Alabama, we are seeing unprecedent demand.”

“COVID shutdowns and the resulting supply chain disruptions are certainly the major cause of the current shortages,” said Parker. “However, other factors are at play such as pent-up demand for new construction — both residential and commercial — as well as international trade challenges, logistics, and natural disasters. Although the supply chain is squeezed more than normal, there’s always been both economic and supply volatility somewhere in global supply chains.”

Parker said materials are readily available and align with standard lead times that developed around construction schedules. This allows them to order materials as needed while also mitigating any effects of inflation.

“Any disruption to availability can cause a ripple effect that drastically alters cost and timing,” said Parker. “Although the last year has been especially trying with material availability and cost, this is something that the construction industry deals with frequently.

“For example, several years ago, we experienced challenges in material procurement due to a series of international trade conflicts. To mitigate this, we purchased and stored materials in warehouses until needed. Construction isn’t something that you can stop in the middle of when things are challenging.”

Oxley agrees the building industry faces these challenges frequently but the pandemic has exacerbated any existing problems.

“A winter storm in Texas recently knocked out two large glass manufacturing plants,” he said. “Glass is manufactured 24 hours a day because they have to keep the heat levels up and they can’t have hot-cold, hot-cold fluctuations. The factories effectively melted down.

“At almost the same time, another glass factory in the Midwest had a fire. That was three major glass plants down, and then came COVID. So, you will always face freaks of nature, but if glass manufacturing is behind, the making of windows falls behind.

“In a standard build, you order windows six weeks out about the time you lay the foundation. Now it takes 16 to 18 weeks for windows and specialty windows take even longer.”

“If you go back to when pandemic started more than a year ago in March, construction never shut down,” said Oxley. “But you have a supply chain set up with trucks and trains and boats, and it never completely shut down, but their priorities were of course healthcare, supplies, and food.

“In the meantime, there was no slowdown in construction. Builders were still replacing appliances, completing remodeling projects, replacing windows, doors, and roofs. That stuff was still coming out of the supply chain. Then people who were stuck at home said, ‘This is a good time to redo the kitchen or bathroom or do a remodeling project.’

“The supply chain got derailed and hasn’t fully come back.”

Ceci said what is different about this shortage over other shortages caused by hurricanes, fires, floods, or other unforeseen forces is that it really is shortages causing the delay.

“Usually, it’s a matter of a supplier having what you need and just wanting a higher price for it,” he said. “And we always watch for hurricanes during hurricane season, and we see massive damage that will cause some disruption in the lumber market for instance that we know will affect price and availability for a while, we deal with that.

“But this is different because it is across the board. Several of the new restaurants and hotels at Town Madison have been held up due to these shortages. Just recently we had a case where the supplier said it was going to be 90 days.

“Louis (Breland) made phone calls until his ear turned blue and found someone who could get it in 60 days. That is considered a victory and we can only hope the supplier is telling the truth when he shortened the wait time to 60 days.”

It makes for a difficult time for some homebuilders.

One builder presold homes before COVID and had contracts with homeowners quoting a price. When COVID struck and prices, even availability, destabilized, they not only had to rewrite those contracts, but they added escalation clauses that caused a great deal of consternation with owners.

“When prices are stable, you can say, ‘I can build your home for $350,000’,” said Ceci. “But when prices are unstable, it is impossible to quote a price because you don’t know what the lumber, the roofing material or electrical and plumbing prices are going to be. That’s why Breland has never had that sales approach.”

“At Robins & Morton, our job is to advocate for our clients,” said Parker. “Although there are things out of our control, one thing we can do is plan appropriately.

“It’s important that we’re always transparent with our clients about the unavoidable issues that we face during the construction process. Our goal is to become a partner to our clients and an extension of their team. This requires trust. In most cases, our clients understand that there are many limitations beyond our control and that are not a result of a lack of planning or poor performance. Fostering this kind of environment on our projects allow us to look at any barriers in a collaborative way, working together to do all that we can to reach our set goals.”

Is there an end in sight?

“We have seen improvement in some areas, but we have also seen an increase in shortages such as drywall and roofing materials,” said Parker. “The challenges in the supply chain for building materials are somewhat different than for items found in a typical storefront due to the types and time to fabricate or manufacture. For example, things like large, structural steel beams must be made specific to the project and can’t be simply stored by the fabricator in countless configurations.

“It’s still too early to determine when we may see volatility subside, especially since so many of the impacts have been a result of the still-present coronavirus outbreak and natural disasters. However, optimistically I can say that our economy and our workforce is adaptable and resilient. We’ve seen many difficult years in our nation’s history, and we will work to continually resolve new challenges with viable solutions.”

“I see light at end of the tunnel,” said Oxley. “I listen to economists and recently one of them predicts that the shortages and prices in construction material and heavy metals, without factoring in inflation, should be back to normal by the end of the first or second quarter next year. I’m hoping for that.”

“If you don’t have to do it right now, don’t,” said Ceci. “Don’t buy new appliances, don’t reroof your house, don’t remodel a bathroom or kitchen unless it involves life safety issues, because if you start what would be a 30-day project today, chances are you will not be finished for seven or eight months and the cost is not going to be in your favor.”

Leading up to the shortage crisis, representatives from the National Association of Homebuilders visited the White House, spoke with the Commerce Secretary, and appealed to Congress for help with pricing because the shortage and high prices affect the affordability of housing people.

“People want and need houses, and we still have to build four to five million homes a year,” said Oxley. “With rising prices, that means we build less houses, which means we are not able to meet the basic demand.

“And owning a home is the American Dream.”