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Full text of "BTEA Newsletter 2-2021"

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Pandemic and Building Boom Leads to 
Spike in Material Prices 


Prices of both lumber and steel have been surging 
over the last year as the global pandemic creates 
major supply chain issues as_ residential and 
commercial construction continue booming 
throughout much of the country. Residential 
construction starts in the northeast were up almost 
70% at the end of 2020 while commercial construction 
continues to work through a historic boom. 


These factors led to a 73% spike in softwood lumber 
prices in the last year according to the Producer Price 
Index from January 2021I. Iron and steel scrap has 
surged 50.8% in the last 12 months, including a 25.8% 
jump from November to December, followed by 
another 20.6% jump from December to January. 


12% : 
, Inputs to new res construction 


Apr 20-Jan 21: 10.5% 








10% 

8% 

6% 
Inputs to new nonres construction 


4% Apr 20- Jan 21: 10.7% 


‘Bid price’ (new nonres building 
construction) Apr 20-Jan 21: 0.2% 


2% 






0% 
-2% 
4/20 5/20 6/20 7/20 8/20 9/20 10/20 11/20 12/20 1/21 


A recent National Association of Home Builders 
analysis found that spikes in softwood lumber prices in 
have caused the price of an average, new single-family 
home to increase by nearly $16,000. In addition, the 
high demand and supply chain issues for building 
materials have led to price gains in other areas like 
drywall, copper, steel studs and even vinyl siding. 


So how are contractors dealing with this lack of 
materials? For those struggling with material prices on 
existing projects, some are attempting to increase 
efficiency or lower labor costs. Others are seizing the 
opportunity to try out different materials. 


These price fluctuations have increased the need for 
contractors to be nimble in their bidding and mindful 
of their contract langauge. Contractors bidding well in 
advance of a project's expected start date should 
make their price quotes valid for a shorter period of 
time and also build in contract language protecting 
themselves from major price fluctuations in the event 
that a spike occurs during a project.