PPI Jumps 24% in 12 Months, Preventing Contractors from Passing Along Cost Increases

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Increases in prices for wood, metals, plastics and gypsum continue to narrow the margin between what contractors pay to acquire raw materials and what they’re able to charge the project owner.

Ken Simonson, chief economist for the Associated General Contractors of America, said the construction industry Producer Price Index – which measures the average change over time in the selling prices received by domestic producers for their output – has climbed 24.3 percent over the past 12 months, increasing 4.3 percent in May 2021 alone. The 12-month climb, he says, is nearly double that of any previous year in history.

“This increase far outstrips contractors’ ability to charge more for projects,” said Simonson. “This gap means contractors are being hit with huge costs that they did not anticipate and cannot pass on.”

Meanwhile, the PPI for new nonresidential construction – a measure of what contractors say they’d charge to build five types of commercial structures – increased only 2.8 percent over the past 12 months. AGC’s recent analysis included narrative from contractors across the nation who said they’d held their profit expectations down to compete for a limited number of new projects.

According to the AGC, the PPI for lumber and plywood more than doubled, increasing 111 percent from May 2020 to May 2021. The index for steel mill products increased 75.6 percent over the same period. The copper and brass mill shapes PPI rose 60.4 percent since May 2020, and the aluminum PPI rose 28.6 percent. The PPI for plastic construction products increased 17.5 percent, while the index for gypsum products such as wallboard climbed 14.1 percent.

Fuel costs, Simonson says, along with surcharges on freight deliveries, have also jumped.

AGC officials including CEO Stephen Sandherr, are urging the Biden administration to end tariffs and quotas on steel, aluminum and lumber as the first step toward easing pressure on construction costs and supply chain bottlenecks.

“Ending tariffs on Canadian lumber, along with tariffs and quotas on steel and aluminum from numerous allied countries, is good policy,” Sandherr said.

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COVID-19 Pandemic Increases Coworking Space Demand, Spurs Flexible Lease Options

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Despite the COVID-19 pandemic uncertainty, markets have demonstrated that the demand for coworking or flexible workspaces will continue to grow. Commercial real estate firm Jones Lang LaSalle predicts 30 percent of the office market will be flexible by 2030. Employers are now seeking to reduce costs and office density, while employees are demanding more flexibility in their work schedules following a year of working from home.

In response, many companies are embracing hybrid work models. According to PricewaterhouseCoopers, 87 percent of executives anticipate shifts in their real estate strategy over the next year. Some organizations have turned to consolidating offices and providing memberships to coworking and flexible spaces to better support remote workers or employees who wish to work outside of the office one to two days a week.

Opportunities for New Construction

This increase in hybrid and remote work structures provides opportunities for mid-size cities such as St. Louis, following the exodus of workers from larger metropolitan areas such as New York and Los Angeles. With workers relocating to smaller markets, employers can still retain the best talent by utilizing coworking spaces. This shift has led to new development in the St. Louis area. Recently, the St. Louis Cardinals partnered with The Cordish Companies to develop a 30,000-square-foot coworking space in Ballpark Village; it will include a mixture of individual workstations, private offices and suites. This is the third location for The Cordish Companies’ coworking brand, with locations in Baltimore and Kansas City’s Power & Light District.

Modifying Existing Spaces & Leases

More than just an office, coworking and flexible spaces are also a favorite amongst small business owners seeking collaboration, flexibility and growth. St. Louis-based coworking spaces such as CIC@Cortex, ThriveCo, OPO Startups or RISE Collaborative Workspace, offer members part-time and full-time private offices, collaborative spaces and business amenities such as Wi-Fi, furniture, coffee bars and community events space. A touted benefit of a coworking space is the opportunity to meet other individuals. Many members have found success establishing new clients and business connections due to the relationships they have built in the shared space. With month-to-month memberships, companies and individuals can try different locations to find the best fit without worrying about long-term leases. Coworking spaces such as ThriveCo also provide tailored concierge services that grant access to virtual assistants, business consultants, graphic designers and more. Accountants are also available in some coworking spaces to promote business development and success.

ThriveCo’s co-owner Katie Silversmith says her firm has seen an increase in interest during the pandemic. ThriveCo reported a waitlist for new members seeking offices in this coworking space.

According to Coworking Insights’ 2020 Future of Work Report: What the Future Holds for Coworking & Remote Work, 71.5 percent of workers who used coworking spaces prior to the pandemic will continue to do so, while 54.9 percent of remote workers who had not previously used coworking spaces are considering joining one as a remote or hybrid work model option.

Conclusion

With the future of office space continuing to evolve, industry sources project a substantial growth in flexible workspace supply and demand. Investors are expected to incorporate more flexible leasing options in their real estate operational models. Therefore, we anticipate a growing need to negotiate contracts for redeveloped spaces and renegotiate existing leases to reflect the changing market. Following the opening of St. Louis’ first coworking space in 2010, more than one dozen distinct coworking locations have developed across the greater St. Louis area, each with its own unique atmosphere and amenities. While still a developing market, one-third of commercial real estate portfolios could include coworking or flexible space by 2030.

Ashley N. Dowd is an attorney at Carmody MacDonald in St. Louis and focuses her law practice in the areas of banking, real estate, corporate and business law. She can be reached at and@carmodymacdonald.com.

This column is for informational purposes only. Nothing herein should be treated as legal advice or as creating an attorney-client relationship. The choice of a lawyer is an important decision and should not be based solely on advertisements.

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EV Charging Stations: Office buildings Will Need Them, and Soon

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By MIKE LAWLESS AND ZACH CARTER

One byproduct of the coming exponential growth of electric vehicles will be a growing demand for charging stations away from EV owners’ homes. Workplace parking lots and public parking garages will be ideal locations for these stations but building owners may find their infrastructure inadequate to support them.

The City of St Louis has already passed an ordinance that doubles the electrical load and design requirements for the electrical service for parking garages. This ordinance is a minimum that may not meet the expectations for visitors as the number of EVs and demand for charging stations continue to grow.

Accommodating charging stations will become a long-term need in the architecture, engineering and construction industry, and it will be critical for electrical infrastructure to be designed with the agility to respond to changes in technology. The infrastructure must allow for faster charging – increased capacity on the building system – and a greater quantity of charging locations. There also will certainly be an appeal from EV owners for the sustainable creation of the energy for their fuel, such as solar. Therefore, owners should evaluate their infrastructure for EV and solar simultaneously. Industry standards to make buildings EV-ready and solar-ready are easily accessible and simple to implement.

Electrical reliability (i.e., EV owners expect to see their battery bar grow) will become a consideration for the power supplies to these EV charging stations. This will lead to consideration of redundant electrical feeds, emergency generation and, more importantly, pairing charging stations with solar and energy storage. Such measures will ensure power always is available so that EV drivers can get the charge they may need to make the trip home.

At the electrical utility level, integrating fast charging of electric cars will add to the demand on an already taxed electrical grid. Initially, this additional power may have to be provided by non-sustainable sources such as gas-powered and coal-powered plants – dirtier sources of power that will offset some of the environmental benefit of electric cars. This will not be the case in the future, however, as decarbonization of the grid continues to take hold. In addition, we will adapt how and when we charge vehicles as well as how we utilize the megawatt hour of battery power that exists in electric vehicles.

Building owners are already currently considering new strategies to accommodate the return of tenants and employees to the workplace as COVID-19 vaccinations increase and restrictions ease. In addition to providing for current and future health and safety requirements, owners who truly want to prepare for the “office of the future” should include charging stations as part of their overall strategy. The growing surge in EVs will lead to an ever-growing demand for charging stations, however, so multiple car charging stations will be necessary. Having multiple EV drivers vying for a limited number of charging stations is not a viable situation, so providing a building capable of accommodating numerous EVs will be an amenity the workforce will welcome with open arms.

The future holds many opportunities as the vehicle fleet is electrified. Imagine charging electric vehicles during the day from renewable sources and then using a portion of that energy to supplement home energy use in the morning and evenings. Moving renewable energy to time periods when photovoltaic (solar) power is not available to meet demand makes the grid more efficient and renewable.

The technology already exists for a bidirectional (two-way) charger for home use. This would allow homeowners to charge and discharge so the EV battery can be used to power their homes. This same technology could expand to commercial applications. An electrical vehicle parking garage, for example, could be a renewable power storage source/sink that supports maximum efficiency for a portfolio of buildings. It could simultaneously provide a source of revenue for the owner, satisfy a need of EV-driving employees and be an added amenity for attracting new tenants – a particular advantage over competitors who fail to provide charging stations.

Energy storage – whether in the form of electric vehicle batteries or building-scale energy storage – will be part of the solution for optimizing renewable energy usage and should be considered when designing charging stations. Doing so will not only support the vehicles of the future but also positively impact the environment as a whole – something 50-year-old electrical technology and design cannot accomplish.

Mike Lawless, PE, FPE, LEED AP, is director of innovation at IMEG Corp. He can be reached at Michael.J.Lawless@imegcorp.com.

Zach Carter, PE, LEED AP BD+C, is a senior electrical engineer working out of IMEG’s St. Louis office, and can be reached at Zachary.W.Carter@imegcorp.com.

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How Do I Work This Remote? Three Tips to Survive and Thrive in the Digital Marketing Era

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By STEPHANIE WOODCOCK

As we continue embracing digital and virtual marketing strategies, the process can feel like getting a new television remote.  We are pressing the buttons and nothing is happening. This is infuriating. In my home, when someone moves the central Hub and the remote stops working, things get ugly fast. Tempers flare. Arms are raised in despair. Lots of finger pointing occurs. As the de facto IT director, I have to “realign” the Hub so that everything is “connected.” This is accomplished through an app on my phone.

Meanwhile, my husband throws up his hands and blames the device. My kids reject the prospect of watching TV altogether and play Xbox. The family is divided. Each to our separate rooms.

Funnily enough, the remote’s name is Harmony. 

A company’s digital marketing is like the Harmony remote. 

If the hub is not aligned properly and synced with the rest of the devices, all hell breaks loose. It’s normal to wonder how to get to this blissful state of alignment. How do we work this thing and keep it humming? How do we maximize its efficiency? How do we keep everyone in the same room? Marketing, sales, operations, accounting – all departments need to be on board with the digital marketing tools.

Social media, email campaigns, banner ads, search engine optimization, Pay Per Click, Search Engine Marketing. The list goes on and on. They are all different buttons available on a digital remote. 

Here are three tips to help you embrace and navigate virtual marketing:

  1. Make your website the hub of your digital marketing. All channels should be aligned to drive traffic to the website. If your lead generation is accomplished through an email marketing campaign of industry news, videos and feature projects, connect these emails to related content on your website. Your website is the gatekeeper to your digital marketing goals. When you get someone new on your website, you want him or her to have a good experience. You want your visitor to read a blog post, watch an explainer video and engage with the content. Use landing pages to enhance the experience and clear call-to-action buttons to encourage engagement. Half the battle is getting customers to your website. Don’t lose them there.
  •   Know your main digital marketing channels and use them wisely. Our marketing budget is a finite resource. In this digital world where options seem infinite, selecting the best channel can seem daunting. From guest blogging as an industry expert (content marketing) to running a drip marketing campaign through email (email marketing), the list of options is endless. Don’t try to do them all at once. Pick a few strategies that work best with your overall goals. To simplify, here are the six main buckets digital marketing channels fall into and a brief description of each:

1) Website/SEO (Search Engine Optimization)

2) Social media posts (building an audience organically)

3) Social media ads (getting clicks through sponsored content)

4) SEM/PPC (search engine marketing and Pay Per Click)

5) Email marketing (direct email campaigns)

6) Content marketing (guest blogging, article submissions, PR campaigns)

Each channel has pros and cons. What are your goals? Do you want to increase brand awareness? Do you want to drive traffic to your website or increase quote opportunities? Do you want to attract the best talent for employment, raise the profile of your company’s services, highlight industry awards or be an expert in your field with guest articles? Each goal requires a different channel and strategy. Some companies benefit most from Google ads, some from growing their social media presence organically and some from direct email campaigns to existing customers. The size of your company, ways you get business, lead generation goals and overall brand health are all factors to consider when laying out a strategy.

        3  Don’t ignore your brand. The word “brand” can be interchanged with “reputation.” How do your customers view your business? Acclaimed marketing guru Marty Neumeier says: “A brand isn’t what you say it is, it’s what they say it is.Branding is not a buzzword for marketers. It is the art of trying to steer your reputation in the right direction. My job as a marketing consultant consists mainly of reframing companies’ brands into an intentional brand versus an accidental brand. Then we create the best strategy to portray that intentionalbrandthrough specific channels.

A brand should be aligned with a digital marketing strategy. Virtual marketing is a brand (reputation) first and foremost. Before we start playing with all the buttons on the remote, we must create a strong visual with clear copy. By creating a true representation of our brand before implementing various digital marketing channels, we increase our chances of “alignment” and success.

It’s like that television show you want to watch with your family. The remote can be connected and the Hub aligned. But if what’s actually on the TV isn’t inspiring? In the same vein, if your customer doesn’t see strong visual with clear copy, he or she will just turn off the message. And we’ll all go to our separate rooms.

Stephanie Woodcock is president of Seal the Deal Too, a St. Louis-based marketing, creative & communications firm. She can be reached at stephanie@sealthedealtoo.com.

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Trivers & S. M. Wilson’s Washington University January Hall Project Receives LEED Platinum Certification

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Trivers and S. M. Wilson & Co.’s Washington University January Hall project received LEED Platinum certification for its green building practices, commitment to environmental responsibility and overall sustainability. Located on the University’s historic Danforth Campus, January Hall was originally built in 1922 as Washington University’s School of Law. As part of the University’s long-term effort to revive legacy buildings, January Hall received an extensive renovation which included the addition of a new 22-seat seminar room on the lower level and new restrooms as well as renovations and reconfigurations of administrative offices, classrooms and the East Asian Library. The original Moot Court and lecture hall is now an Active Learning classroom with highly flexible seating arrangements and integrated technology.

To enhance the energy performance of the building, the renovations included adding a second layer of interior glazing to the existing leaded glass windows, insulation of certain exterior walls, and a new mechanical system with energy recovery and demand-control. Interior finishes were selected to support sustainability and human health goals by prioritizing recycled content, environmental reporting, low-VOC, and Red List (banned chemicals) free materials. The building now houses offices and teaching space for Washington University’s professional and continuing education division, University College.

Developed by the U.S. Green Building Council (USGBC), LEED (Leadership in Energy and Environmental Design) provides building owners and operators a concise framework for identifying and implementing practical and measurable green building design, construction, operations and maintenance solutions.

Trivers served as the Architect of Record and S. M. Wilson the Construction Manager. During the design and construction, the team worked together along with Hellmuth+Bicknese Architects, Sustainability Consultant, to ensure that sustainable elements of the project were prioritized and retained to achieve LEED Platinum, the highest LEED certification. January Hall received the following notable sustainable accomplishments:

  • Washington University’s first project certified under LEED v4
  • Achieving all possible points in Optimize Energy Performance with 35% energy savings
  • Verified construction and demolition waste management achieving 96.3% diversion
  • Storage and collection of recyclables
  • Long-term commitment with enhanced commissioning and advanced energy metering
  • Indoor water use reduction of 46.5%

In 1975, Trivers was founded on values that still characterize the firm today: creating architecture of lasting positive consequence. In a city renowned for its historic architecture, but in severe need of restoration and fresh ideas, we established a reputation for thoughtful design that responded to context. Our early focus on historic renovation and adaptive reuse rapidly grew to include ground up construction. Today, while continuing our commitment to St. Louis, we work for a range of clients across the country from government to hospitality to education to business to cultural and civic. For more information, visit www.trivers.com.

S. M. Wilson is a full-service construction management, design/build and general contracting firm with headquarters in St. Louis and offices in Cape Girardeau, MO and Edwardsville, IL. Founded in 1921, and celebrating its 100th year of serving the community, S. M. Wilson is dedicated to going above and beyond expectations for their clients by putting people first. The 100% employee-owned company is one of the leading construction management firms in the Midwest. For more information, visit www.smwilson.com.

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Top 10 Things to Know about the Internet of Buildings

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By JEFF CARPENTER

Jeff Carpenter

You’ve no doubt heard about this phenomenon known as The Internet of Things, or, perhaps, the Internet of Buildings, but you’re not sure how they relate to building design and construction. No problem. In the spirit of the “Late Show with David Letterman,” here are the Top 10 Things to Know.

#10. The Internet of Things (IoT) begat the Internet of Buildings (IoB), which represents a design philosophy more than it does a specific collectionofproducts. Just buying certain products alone does not guarantee the benefits of the IoB.

#9. The phrase “the Internet of” is best understood by thinking of it as a verb that means “giving connectivity to things(devices or systems) in your building.” The revolutionary impact of this concept is best appreciated by understanding that many of these thingshave never had connectivity before.

#8. Focus on the desired outcome. While it is important for things in a building to gain connectivity, your goals should be identified first. Ask yourself what you want to achieve now or in the future, then identify the things whose connectivity will allow you to achieve those desired outcomes.

#7. Difficulty identifying important future needs and outcomes rightnow does not mean you should not concern yourself with the Internet of Buildings. Such a decision does not take into account the undeniable future impact of analytics and artificial intelligence (AI) in buildings, the benefits of which could provide your competitors with a distinct advantage should they decide to prepare for the IoB now and you do not.

#6. Analytics and AI are the computing power that allow you to achieve outcomes in your building that would not be possible with unconnected systems and conventional human decision making. The algorithms that power AI need massive amounts of data for machine-based learning and decision making.

#5. The reason that you connect thingsin your building is so that they can communicate data, which is then fed to the algorithms of AI to achieve your desired outcomes.

#4. This does not have to be expensive. A key element of the IoB is unifying building system selection, installation, and integration around a common set of industry-standard IT-based principles. This allows for tremendous economies of scale in a building’s infrastructure, resulting in capital being available for the fun stuff!

#3. If you want unified building systems, you need to unify your design partners and unify your construction partners — and have a single point of responsibility for design and a single point of responsibility for construction of the entire building systems ecosystem. If you find yourself hiring a consultant for AV, a different firm for telecom and security, and a separate group for MEP, then you’re moving further away from your goal. If you’re dividing technical specifications and distributing them to three or four different tier 2 subcontractors, then you’re moving further away from your goal.

#2. Take an active role in achieving your outcomes from the start. Tell your architect you want to be involved in the selection of the design team. Ask the candidates to discuss specifics about their strategy and process as it relates to the Internet of Buildings. This is the best way to ensure everyone on the design team understands your goals and becomes a trusted partner.

#1. Spend your first dollar on hiring a trusted design partner who can provide thought leadership. The second dollar should be spent on a unified infrastructure that allows you the flexibility to do tomorrow what capital constraints won’t allow you to do today. Then, and only then, should you chase the shiny objects that you were tempted to spend your first dollar on. Resist the temptation! The Internet of Buildings will bring so much over the next decade that we can’t see today. Getting the design approach and infrastructure right today is critically important. You only get one chance to build a building right.

Jeff Carpenter, PE, RCDD, is a principal at IMEG Corp., where he leads the firm’s technology team and is vice president of India Operations. He has spent his entire career with IMEG, where he has led some of the firm’s largest, most complex projects. He can be reached at Jeffery.A.Carpenter@IMEGcorp.com.

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Sales Professionals: Challenge Yourself to Go Beyond the Virtual into the Actual

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By TOM WOODCOCK

Tom Woodcock

So, we’ve moved into the virtual age of sales, eh? Personal relationship is non-existent now, right? Outside sales is a thing of the past, correct?

I beg to differ. The COVID era has moved the bar, but don’t think for a second you can abandon tried and true sales practices.

Whether you agree or not is irrelevant. Personal sales contact is alive and well. Due to the pandemic, my speaking schedule has all but disappeared. I’ve gone back into the world of selling. I am now literally practicing what I preach.

Guess what? It still works! Prospecting, entertaining, networking and aggressive customer contact is still effective. I’m averaging 40 to 50 face-to-face meetings a month. Some reps don’t even Zoom that much.

What I’m seeing is the easy excuse that people aren’t meeting. Hmmm, maybe they aren’t meeting because they don’t want to meet with you. Customers are hesitant to take meetings with individuals who have zero interest factors. If I’m going to make a commitment to see you face to face, you’d better give me a good reason to do so. Either you have a real, tangible value for me as the customer or you’re flat out fun to be with. The more people are cloistered, the more they’ll want to get out.

The question is this: Will you be the vehicle to bring customers back out into the light?

I recently met with a new account and delivered chocolate covered strawberries to their team. Old school, right? Guess what? When their next need arose, I got the business. Sure, I did the basics of presentation and follow-up, but I was the only person to think of them personally.

You see, virtual is completely impersonal. Everyone becomes an image. You’re no different than the meme they saw on social media. Plus, your competitor was on screen just before you, meaning there’s absolutely no competitive separation. This drives commerce to a price-based dynamic. Everyone is simply a video presentation, no strawberries.

The one thing I’ve learned in 30-plus years of selling is this: People like to be acknowledged. Being nice enhances loyalty. The nicer you are, the more critical information you get. The virtual generation may never learn this lesson. As I incorporate young sales reps into my network, I’m shocked how line by line they are, almost robotic in their approach. They can’t tell a joke, have no idea how to compliment someone and are cheaper than Ebenezer Scrooge! I can run sales circles around these rookies.

The point is this: Don’t believe the press that sales work is now a virtual discipline. That is a false premise. You know why? People are not virtual. They are real and need human interaction. The sales reps who reach out personally will now stand out. Let the rest be lost in the wasteland of virtual reality.

Personal interaction will always be the most effective way of selling. Regardless of what the tech giants tell you, the reality is obvious. The more that salespeople gravitate toward virtual selling, the more I will strive to get face to face with clients. Hey, I understand the pressure to conform to virtual and the shift toward marketing. It takes courage to go against the grain.

Bottom line: The reward is substantially greater for those who will not relinquish traditional sales methodology. I know many will disagree with this premise, but I’m witnessing it firsthand. There is merit in being cautious, and I respect that. I’m simply pointing out what is effective in this sales climate. That is, for all intents and purposes, my job. I know many reps are frustrated and struggling. My advice is to look under every bush, keep pursuing clients and don’t give up on the sales principles that work. Sooner or later, it will break for you. Honor customers who are foregoing personal contact and connect with those who are open to it.

The choice is yours. I cannot make that call for you. Ultimately, it will still come down to the trust in relationship that your customers have that will tilt the decision scales. Challenge yourself to go beyond the virtual into the actual!

Tom Woodcock, president of seal the deal, is a speaker and trainer for the construction industry nationwide. He can be reached via his website,  www.tomwoodcocksealthedeal.com, or at (314)775.9217.

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Can Employers Legally Require Their Employees to Get a COVID-19 Vaccine?

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Candace Johnson

As the COVID-19 vaccine becomes more widely available, many employers are asking if they can require employees to receive the vaccine and the risks in doing so.

Employers may require employees to get a COVID-19 vaccine as a condition of employment, subject to limited exemptions, which are outlined below.

Religious Beliefs – Employees may request an exemption from a mandatory vaccination requirement based on their religious beliefs. Title VII of the Civil Rights Act covers protected groups, including those with religious beliefs. Employers must provide accommodations for employees with “sincerely held” religious beliefs.

Disability – Employees may also request an exemption from a mandatory vaccination requirement based on a disability. If employees have a qualifying medical reason to not get a vaccine, employers must accommodate such requests under the Americans with Disabilities Act (ADA). 

In these situations, employers and employees should work together and sufficiently communicate to determine whether a reasonable accommodation can be made. When considering an accommodation, employers should evaluate:

  • The employee’s job functions.
  • How important it is to the employer’s operations that the employee be vaccinated.
  • Whether there is an alternative job the employee could do that would make vaccination less critical.

Confidentiality – Also pursuant to the ADA, employers should not disclose which employees have or have not been vaccinated. Under the ADA, employees’ health information must be kept confidential.

Because exceptions must be made in certain circumstances, if an employee refuses to be vaccinated, employers should endeavor to find out why.

If employers are hesitant to implement mandatory vaccines, they can alternatively strongly suggest the vaccine and focus on steps they can take to encourage and incentivize employees to get vaccinated. Such incentives could include:

  • Make obtaining the vaccine as easy as possible for employees.
  • Cover any costs that might be associated with getting the vaccine.
  • Provide paid time off for employees to get the vaccine and to recover from any potential side effects.

In the end, navigating the COVID-19 pandemic has been challenging for both employers and employees. Therefore, communication is critical to keeping employees safe and healthy.

Candace Johnson is an attorney at Carmody MacDonald and focuses her practice in the areas of labor and employment, real estate, and general civil litigation. Contact Candace at cej@carmodymacdonald.com or (314)854-8647.

This column is for informational purposes only. Nothing herein should be treated as legal advice or as creating an attorney-client relationship. The choice of a lawyer is an important decision and should not be based solely on advertisements.

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Copper Prices Soar to 10-Year High, Metal Heads toward Deficit in 2021

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Copper prices have climbed to their highest level in a decade.

According to global metals analyst StoneX, copper was already trading at a nearly eight-year high in January when prices surged again in mid-February. In mid-February, copper contracts topped $4.25 per pound, approaching an all-time high of $4.58 per pound that the metal reached in 2011.

Investors are predicting that the supply chain will continue to tighten for this metal as the global market gradually recovers in the pandemic aftermath.

“We forecast that copper demand will rise in 2021 by approximately 5 percent year over year,” said Natalie Scott-Gray, a senior metals analyst at StoneX. “Demand is projected to outstrip supply, which we expect to grow by 2.3 percent year over year.”

StoneX analysts aren’t alone in predicting the looming copper supply deficit worldwide. Predictions are than the global copper supply is moving from a surplus in 2020 to a deficit of as much as 200,000 tons this year.

In January, the Copper Monthly Metals Index increased for the fourth month in a row. Analysts point to China’s manufacturing halts and slowdowns during 2020 as a key factor in the supply chokehold. CitiBank analysts say they expect copper prices to continue increasing, both in the US metals market and abroad, as key industries such as construction gain momentum. They project the copper market to shift into a deficit during the second half of 2021 and forecast deficits in the metal during 2022 and 2023, too.

From January through November of last year, the U.S. sold more copper scrap to China than during the same period in 2019. The U.S. exported 102,145 metric tons of copper scrap to China last year, an increase of 20 percent over the same 11 months in 2019. Analysts say China is an important ingredient in the overall recipe for copper demand, as the country is a significant consumer of the metal. Commodity analysts at the Bank of America Merrill Lynch say demand from China was the main driver of copper prices in 2020, but that as consumption from Asia has slowed in recent months, the recovery has broadened.

Pyramid Electrical Contractors, Inc. President Bob Snell knows well the volatility of the metals market. Snell says the firm began seeing increases in the price of not only copper but PVC resins and steel, too, as far back as August 2020.

“In 2021, the price increases have definitely accelerated,” said Snell. “It does affect projects that we had under contract pre-COVID. Some of those projects got put on hold and are now coming back around and we’re needing to adjust the estimate to reflect the metals market volatility. The volatility must also be taken into consideration when estimating our current projects.

We receive weekly conduit and wire pricing updates from our vendors and are continuously adjusting our estimating software to reflect what is occurring. It has been difficult for anyone in the industry to determine what’s going to happen next, even in the near future.”

Murphy Company VP of Estimating Kevin Suiter agrees.

“We’ve received notice from several of our material suppliers that pricing is going up,” Suiter said. “As far as estimating is concerned, we are constantly updating our prices to make sure our estimates include the latest prices. We are also including verbiage in our scope letters to notify our clients that our pricing is only good for a limited time due to the volatility in the market.”

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Building Materials Supplier, AGC Economist Attest to COVID Lumber Price Spikes

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By KERRY SMITH, Editor, St. Louis Construction News and Review Magazine

A Metro East building materials supplier with 72 locations across four states says the latest analysis by the Associated General Contractors of America is accurate: Builders and consumers are hurting from un precedented increases in the cost of lumber.

Robert Plummer, chairman and CEO of R.P. Lumber Company, Inc., says record price increases of more than 200 percent in lumber and panel products are not only choking the supply chain but also affecting commercial and residential contractors as well as consumers.

The life-long industry veteran’s observations track with AGC Chief Economist Ken Simonson’s latest analysis – released Feb. 17 – that prices for materials and services used in construction and contractors’ bid prices have diverged sharply since April 2020. A government index measuring the selling price for materials and services used in nonresidential construction increased 2.5 percent from December to January and a whopping 10.7 percent since the extreme price increases.

“Current conditions are harming contractors on existing projects and making it difficult to bid new work at a profitable level,” Simonson said, noting that the PPI for new nonresidential construction is a measure of what contractors say they would charge to erect five types of nonresidential buildings. The PPI increased only .2 percent since April. “While contractors have kept bids nearly flat until now, project owners and budget officials should anticipate the prospect that contractors will have to pass along their higher costs in upcoming bids,” he added. “Since this government data was collected more than a month ago, numerous sources indicate price increases have continued or even accelerated since then.”

Plummer attests that this is indeed the scenario. In addition to its 44-year history of serving as a building materials supplier, R.P. Lumber operates a truss plant and has retail home centers across Illinois, Missouri, Iowa and Wyoming.

“In all these years, I’ve never seen anything like this,” said Plummer. “We buy and sell a tremendous amount of lumber, drywall and roofing product – thousands of semitrailers’ worth – every year. It’s shocking where the price of lumber has gone since the (COVID) pandemic began, particularly on lumber and panels products such as OSBs (oriented strand board), ZipWalls and plywood. One year ago, we were paying somewhere in the $300 range per thousand board feet for 7/16ths (7/16-inch by 4 feet by 8 feet). Today we’re paying slightly more than $900 for the identical material.”

Even precut lumber is not immune from mills’ drastic price increases since COVID hit. Plummer says a 2×4-foot precut that cost in the $3 range in February 2020 now costs in the $6.50 to $7 range.

No doubt supply chains were impacted by the West Coast wildfires of 2020 that consumed huge forests of cedar, spruce and fir, and tariffs for product entering the U.S. from Canada has also played a role, Plummer says. But beyond these conditions, the severity of material increases continue to stymie lumberyards and contractors while hitting owners and homeowners’ bottom lines.

“This week we’ve heard of another 20 percent price increase in drywall, the second such increase this year, and it will take effect in March/April,” said Plummer. “In addition to lumber price increases, we’ve experienced three increases in the cost of metals, from steel studs to soffits, metal panels and I-beams. And we’re anticipating a second increase this year on wiring and on roofing materials. Builders will forward these increases through the pipeline. They may be protected on one job if they have locked-in pricing, but they may feel it on the next job.”

The entire industry is buying more building materials from Europe, according to Plummer. “Euro-Premium, a spruce product, is shipped into the U.S. more cheaply than we can many times buy a comparable product domestically right now,” he said. “That’s a reflection of how volatile the domestic supply chain is right now.”

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