Why Are Construction Materials So Expensive?

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Why Are Construction Materials So Expensive?

We have seen a major increase in the cost of construction materials over the past year. This is how the pandemic is affecting material prices.

The cost of construction materials is on the rise. In 2020 alone, lumber prices went up 80%. And this inflation had an even greater impact on products like oriented strand board, the cost of which rose a whopping 138% last year. 

Lumber prices, in particular, are up because of the increased tariff on imported Canadian goods. Currently, US construction companies are paying 20% taxes on softwood lumber.

Yet, the real culprit for rising prices is construction industry shortages. Keep reading to find out why low manufacturing, labor, and equipment supply is wreaking havoc on your margins. 

Construction Materials Backups

COVID-19 led to economic shutdowns in much of the world. The US was no different. Manufacturing virtually stalled for months as companies furloughed or let go of workers. 

When the economy reopened, there was a backlog of work to manage. Not only that, but manufacturers who let go of a portion of their staff quickly realized they didn’t have enough hands on deck to support that backlog. 

These issues have resulted in a shortage of construction materials and a subsequent price hike. Metal component and lumber prices have taken the biggest hit. Drywall prices have also shot up by 20%.

But lack of materials isn’t the only supply-demand issue driving up prices. Labor supply shortages are also to blame. 

Low Labor Supply

Manufacturing employees aren’t the only laborers in short supply right now. When economies shut down due to COVID, logistics companies pushed pause, too. This led to a drop in the number of truck drivers available.

Labor shortages also affected ports. Ports laid-off workers during lockdowns. Now, they’re struggling to meet the increased demand with fewer workers than ever before. 

In the scramble to hire new employees, ports and trucking companies are paying a premium. Higher wages result in greater transportation fees. And those fees get added to the cost of construction materials.  

Logistics Equipment Shortages

The final reason for rising building materials prices is a logistics industry equipment shortage.

For example, the sharp rise in e-commerce buying after the lockdowns meant all empty shipping containers went straight to China. This led to a container shortage in the rest of the world.

Record-breaking port backups in Los Angeles and Long Beach had containers sitting on ships for weeks. Once those containers were finally unloaded, a shortage of chassis means containers sat, full, waiting for pickup. 

To get building materials on time, suppliers have been forced to pay high prices to get their goods into containers and onto chassis. And they passed some of that cost onto construction industry players.  

Get All Hands on Deck with JSK Recruiting

Construction materials prices are up because of supply-demand issues in the construction industry. Labor, equipment, and materials shortages are all to blame. 

There’s little you can do about equipment shortages. But if you’re looking for laborers to help reduce costs at your business, we can help. Get in touch with us today to recruit more workers and get back on track. 

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