Supply Chain Update

Many of us on the supplier side of the construction industry are familiar with the unprecedented shortage of materials, disruptions to the supply chain and ongoing escalation of costs this year. Chances are, if you’re an installer/contractor, you’re also well aware of the headaches this year in getting materials for your projects and rising material prices. If you’re a specifier, general contractor or building owner, you might not have a full picture of what has been happening with material supply. The best thing we can do as an industry is communicate, communicate, communicate, and do our best to continue educating and setting proper expectations with our customers, stakeholders, and partners. 

Most of us have encountered these impacts to some degree in our personal lives or at least caught wind of what’s been happening in the news. Whether you’ve tried to buy a new appliance, laptop or other consumer item that is typically readily available, you’ve most likely had to pay more for that item and wait longer to get it. Things have been no different when it comes to construction materials and in some cases even worse. The intent of this article is to help shed a bit more light on what has been happening in the construction industry, and more specifically roofing. 

It’s tempting to lay blame at the feet of the global pandemic for all the woes we’ve seen this year with supply chain and costs. As the pandemic began and demand started to dip globally, it is true that many producers of key raw materials or products used to produce construction materials ramped down production levels, decreased staffing, etc. This led to lower stock levels of materials and inventory amounts far below what was needed for the unpredicted, high demand that would come in 2021 as countries began opening up more.   

The reality though is that the root causes of what we’re seeing with supply and costs in 2021 are a lot more complex and there’s more than one culprit for the current situation. Certainly, the Covid outbreak has been one of the biggest contributors but it is not the only factor at play. The truth behind the current landscape we’re seeing in construction and other industries is a combination of factors that have created a bit of perfect storm and caused impacts to supply and cost completely unique to what we’ve experienced in the past. 

• Severe Weather Events: The 2021 winter storm Uri impacted the production of petroleum-based and other industrial chemicals throughout the Southwest.  Most of the chemicals used to make many types of roofing membranes, insulation and adhesives come from this area of the U.S. The suddenness of the deep freeze resulted in not only shutting down factories but also caused damage to equipment and pipes transporting raw materials. Some factories were down for months and other manufacturers declared force majeure or had to allocate product to their customers. Significant volumes of standard truck and intermodal freight were removed from service during this crisis. The El Derecho storm, which impacted parts of the Midwest, caused further havoc and disruptions to trucking and logistics and required significant roofing volumes of roofing materials to repair the damage.

• Truck Driver Shortages: The trucking industry moves nearly 71% of all domestic freight. Driver personnel is woefully undersupplied, and the industry will need to hire 1.1M drivers to keep up with current demand.

• Global Logistics: Ports of entry worldwide are experiencing significant delays off-loading cargo ships.  Some ports have experienced delays up to three weeks.  The overall lag in turnaround has effectively reduced shipping capacity by over 5%.  Air freight is experiencing unprecedented troubles as well.  Capacity is down 12% and demand up 25%.

• Suez Canal Obstruction: As one of the world's busiest trade routes, the canal’s obstruction prevented an estimated $9.6 billion worth of trade from occurring. The blockage delayed a range of raw materials from reaching the United States. Even though this trade route has been opened, the United States continues to be affected by the closure.

• Shipping Containers: There are not enough intermodal containers available to service the volume of goods to be shipped.  Multiple factors have driven this situation including increased demand of consumer products during COVID, out of balance trade routes and inability of manufacturers to produce new units.

• Government Stimulus: With government aid, United States’ businesses and consumers have ramped up spending, adding to the already significant supply/demand imbalance. 

• Labor Shortages: The Labor Shortage we are all dealing with, has made it increasingly harder to find labor and this has especially affected manufacturing facilities and the ability to secure and obtain raw materials.

• Trade Wars: Analysis by Goldman Sachs found that the consumer price index of tariffed goods had increased dramatically compared to non-tariffed goods.

When it comes to roofing, what’s even more challenging is that suppliers and contractors are not just dealing with raw material shortages for the waterproofing membranes. While every technology within the roofing space (PVC, TPO, EPDM, Mod Bit, etc.) have faced shortages and rising costs of raw materials, what makes the industry unique is that you’re dealing with a complete system and not just supplying that top waterproofing layer. A full roof system can involve a large variety of products including adhesives, screws and plates, gypsum boards, vapor barriers, etc. All the manufacturers of these system components are also dealing with supply issues and rising costs of raw materials. 

Probably the biggest impact to supply timelines on roofing projects has been polyisocyanurate (or “poly-iso”) which is the most common rigid insulation used on commercial applications. Their industry has had major shortages of raw materials this year, most notably with MDI. As of the writing of this blog, timelines to get poly-iso onto a job site are at 31+ weeks with no expected improvement in the near future. While there are other alternatives for rigid insulation like polystyrene, those materials aren’t always appropriate for all projects. In short, the reality is most of the components of the roof system could be delivered to a job site much sooner, but projects have to sit in a holding pattern until the insulation can be supplied.

So, what does this mean for all of us involved in the construction industry and especially roofing? Most likely these impacts will continue at least through the first quarter of next year if not longer. The most important thing we can all collectively do is work together closely, communicate, and strategically plan out projects. Setting realistic and clear expectations that costs will be higher and timelines will be longer is the key to planning out a project. Having open channels of communication and strong partnerships between the suppliers, installers, specifiers, general contractors and building owners can only help increase the successful completion of projects. Start planning and talking as early as possible in the process and map out the needs of the project to best supply materials when they are needed. Eventually things will settle down, but for now, the more we work together and communicate, the better we can all successfully navigate these current challenges.