In recent years, there has been a global impact on supply chains across all industries, including in the construction sector. These drastic changes in the price and availability of construction materials have impacted the overall construction industry. However, builders can frequently see material volatility even without a global pandemic affecting production and shipping capabilities.
Shortages in products and increased demand often drive the rising cost of building materials. However, material volatility can also be caused by raw material scarcity, natural disasters such as wildfires, changes to tariffs on materials that have to be imported, or merely by the fact that you cannot get the materials domestically.
This blog will explore recent material costs and availability trends and how builders can manage the risk of rising and falling construction material costs.
Cost Volatility and Extending Construction Timelines
The recent material volatility has been caused partly by construction material suppliers' inability to obtain raw materials, produce final products used in construction, and even ship out their products. For example, the inability to obtain raw materials has made finding building elements such as windows, doors, and roofing difficult.
The rising and falling cost and availability of building materials can significantly affect construction projects' overall budget and timeline. The cost of producing commercial and residential developments can, in turn, impact a contractor's ability to take on specific development projects.
But it isn't just the price of materials that is impacted; the lack of construction products also creates long waits for them to arrive and become available. These delays impact contractors' ability to meet their deadlines and even fulfil a project as planned.
Overall, we have seen that material volatility creates a snowball effect in the construction sector and many other industries, impacting budgets or timelines.
Which Construction Materials Have Seen a Rise and Fall?
Across the board, there has been a recent change in almost all building materials, whether it is because of a lack of access to raw materials or limited production and shipping capabilities.
Recent material availability trends have affected the core of many of Stretch’s build projects and other contractors’ projects as well. For example, steel, cement and plastics have seen a trend upwards in price. In addition, we have all seen the extensive coverage that lumber had reached record levels in Fall 2021; over the winter it had come down but has recently rallied again.
Recent global impacts have also affected the price of chemical-based building materials such as paint, sealants and adhesives.
We have even seen the impact of fuel prices on their builds as that fuel is used to power construction equipment and transport materials to the project sites.
These are just a few examples of building materials recently impacted by fluctuating material trends.
Mitigating Construction Project Volatility
How can contractors mitigate and prepare for markets that may be more volatile with drastically changing material prices to help benefit investors? After all, there is no way to completely predict when the cost and availability of materials may change. But there are ways to be prepared and mitigate construction project volatility.
In volatile markets, we as contractors must weigh which risks we can take on and which ones to avoid when bidding for jobs and purchasing materials.
Builders need to monitor supply chains for any movement to mitigate certain risks. Maintaining a close watch on any changes to material costs may make it easier to anticipate any drastic price increases, which we can relay to clients and investors.
By developing a buying strategy, based on order books, and if the construction company has the capabilities both in buying power and storage, it could be beneficial to purchase materials in bulk when prices are fairer. They could then pass the savings on to their clients.
It is also essential for us to maintain communication with clients and be transparent regarding material volatility trends as they can impact your project's budget, schedule and design.
The changing cost of construction materials can greatly impact the construction industry, whether material price volatility is caused by the demand for construction materials or supply chain disruptions. We have seen an impact on overall construction prices due to the rise and fall of material prices.
Stretch’s Response to Construction Material Fluctuation
Stretch Construction has taken several steps to provide our clients with the most solid outcome when addressing material volatility. Firstly, we only work with sub-trades and suppliers who can prove their supply chain is intact and those who only have proven track records.
We are also notifying and preparing our clients for some of the possible challenges we face when it comes to materials. Communication is paramount, as the last thing we want to do is surprise our clients. Our team always does our best to stay ahead of any possible issues.
So, by monitoring and identifying construction material prices and having a strategy in place, commercial construction companies like Stretch can perform well in a volatile market.