In the 3 years since the Coronavirus began the construction industry has seen its costs increase and supply chains disrupted more significantly than many of us have ever seen before.
Regarding Costs - It is generally assumed that costs will never recede to pre-pandemic levels. A quick glance at two product lines underscores the increases being absorbed.
February 2020 vs. February 2023
Steel (Round Bar and Flat Bar) - 59% increase
Rust Inhibitive Primer – 38% increase
Note : We are only discussing products. The cost of Labor, the big issue driving our budget, has increased 36.5% in the same time period.
What is important to note in the above comparison is the source of each commodity. Almost all the steel we purchase is recycled. Its basic component, scrap steel is a widely fluctuating commodity, much the same as oil. Further, the manufacturing process is relatively flat in that it has very few steps. The cost of recycled steel has come off its 2022 high and based on demand may continue to soften.
Paint / Primer, on the other hand, has no recycled content. A quality rust inhibitive steel coating requires very specific and very consistent components. The supply chain of components is very wide and long, with countless, exacting processes. For this reason, we believe costs for products such as primer will remain at present levels or continue to increase due to upward cost of labor dispersed through its protracted manufacturing chain.
There has been a slowdown in the cycle of cost increases. In 2021 and 2022 several product lines saw as many as 3 rounds of price increases in one 12-month period. Looking over the recent 6 months September 2022 through February 2023 there appears to be some consistency returning to the cost increase cycle.
Supply Disruption – Many product lines are getting back to normal however some notable exceptions exist. Most of the required components have predictable demand and an unlimited shelf life. The simple solution for our company is to stock more than adequate inventory to avoid any shortages. Frequently we are placing orders for inventory that will not be needed for as much as 6 months. This includes;
- Round bar and hardware necessary to manufacture Anchor Bolts, Turnbuckle and Clevis Rods
- Slotted Steel Shims, both plain finish and Hot Dip Galvanized
- Wedge Inserts, Askew Head Bolts
- Masonry Anchors, including Wire Rod Anchors and Slotted Channel
- Steel Wedges
Where it becomes more difficult is in the perishable product line and made to order items, such as;
- Rust Inhibitive Primer – all paint has a limited shelf life. Therefore, we have to coordinate orders with production. The paint industry in general suffered an extra setback when Texas went through a deep freeze that badly damaged several major resin factories. This is still affecting the supply of steel coatings and rust inhibitive primers.
- Cold Galvanizing Compound – again, this is essentially a paint product.
Made to Order
- Clevises – unlike turnbuckles, which are consistent and standard, clevises have 3 variables that must be maintained per engineering drawings, i. – thread diameter, grip width and clevis pin hole diameter. For this reason they get fabricated at time of order.
- All bearing assemblies get made to order. This includes Fluorogold® Slide Bearings, Elastomeric and Viblon Bearings, etc.
In situations regarding cost and timely delivery there are some basics that will assist in making sure your project is taken care of. First, request quotes early and determine stock availability at that time. In many cases we can reserve inventory to assure it is available when you need it. With cost increases seemingly leveling off it is also possible to lock in an estimate for a longer period to help maintain the project budget.
With any questions or requests, feel free to contact a sales representative.
For more in depth information and reports on Construction Industry Outlooks the links below may be interesting;