Rising RAW Materials Prices in the construction industry

Rising Wood and Steel Prices and How it Affects the Construction Industry

05/2021

We at TYL want to make sure that our clients are kept up to date about the goings-on of the construction industry and how those events can potentially affect them. 

Since March of 2020, lumber and steel prices have been steadily rising in the U.S. Why is this? Let’s examine each industry to find the root causes.

Rising Prices in the Lumber Industry: What are some of the factors contributing to this phenomenon?

  • The COVID-19 pandemic caused a mismatched supply and demand
    • Lumber mills reduced their production, while millions of Americans flocked to home improvement stores in search of lumber for their quarantine DIY projects. 
  • Decreasing prices in the Fall of 2020 led to rapid panic buying, driving prices up again
    • Because prices spiked throughout the spring and summer of 2020, many homeowners and industry professionals decided to hold off on new projects until prices dropped again. Since lumber is a fairly cyclical product, with the higher demand during the spring and summer and lower demand during the fall and winter, the prices did eventually decrease in the fall of 2020, only to shoot up again when homeowners and industry professionals jumped at lumber when the price dropped. This created a second surge and pushed the price even higher than it had been in the summer of 2020!

Rising Lead Times and Prices in the Steel Industry: What are some of the factors contributing to this phenomenon?

Steel prices have also shot up during the past year. Prices are currently sitting at $1,748 per ton; the highest in 13 years. 

  • The ramp-up of steel production after the worst of the COVID-19 pandemic couldn’t keep up with sky-rocketing demand
    • The steel industry’s demand decreased significantly during the beginning of the pandemic as many large-scale construction and manufacturing companies either completely shutdown or significantly decreased production. As demand steadily increased after summer of 2020, steel mills had trouble ramping up production. 
  • Steel demand is still high while manufacturing centers are still running at partial capacity. 
    • Demand is now higher than ever with most steel mills still running at limited capacity. For example, in February of 2020, steel mills were running, on average, at 87% capacity, which is fairly standard for many raw material manufacturing plants. In February 2021, steel mills are running on average at 75% despite demand being higher than in 2020.

What does this mean for you as a property manager or homeowner?  

The backlogs and price booms in these raw materials industries result in increased pricing and longer lead times.

Hopefully prices and lead times will be dropping after the spring and summer construction boom, but experts are still unsure. In the meantime, we hope that you found this notice informative and if you ever need any work done on your property, give TYL a call at 877-895-1044 or click the mail icon below to email us at projects@tylinc.com!

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