MATERIAL PRICING IN THE CURRENT MARKET BY JOSH LITZMAN | STEVEN KEMPF BUILDING MATERIALS “The New Normal”, “In These Trying Times”, “Due to COVID…” These newly hackneyed phrases have replaced “Every cloud has a silver lining” or “Get a taste of your own medicine”. As trite as those are, I think we wrinkle our noses more at “The New Normal”. In our industry, we have seen our fair share of hardship including construction shutdowns, new protocols, but worst of all a material pricing run-up that rivals the Dutch Tulip crisis. With all the factors at play, expectations need to be adjusted in regard to material cost.
EXTERNAL FACTORS At the beginning of the pandemic most businesses felt we would see a downturn of Biblical proportions. Capacity was shuttered and people were told to “shelter in place”. This was done in a frantic effort to control the pandemic before it started, but it was already too late. We all recall the construction shutdown which caused a ripple effect in our economy and is still impacting our lives. Once these restrictions were lifted in May, an urban exodus started which triggered car purchases, new home purchases, and a need for warehousing and logistical capacity for in-home delivery of all consumer goods.
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At the same time, the United States saw a period of civil unrest that rivaled our most tumultuous times. This led to riots and protests across our great land. The confluence of events of last Spring created a tremendous demand for cars, appliances, lumber products, and new dwellings. At the same time, manufacturing was ratcheting down capacity. This has led to an unbelievable increase in pricing that is may be unrivaled.
LABOR There is some validity to the commentary that the Government intervention may have created a short-term labor issue. In some cases where furloughs were needed, the additional funds on top of normal unemployment rates may have caused a disincentive to return to work. Couple that with pandemic protocols and potential positive tests, the labor force took a hit over the last 12 months.
LUMBER In the wake of the urban exodus and the “stay at home” orders many people began purchasing material to create outdoor spaces to stretch their proverbial legs when they had no public place to go. This demand, coupled with raw material delays due to labor shortages among other things, created a tremendous price increase. The pressure looked to subside in the fall of
