Supply Chain

Suppliers Navigate Supply Chain Turbulence


Suppliers and contractors alike are continuing to navigate worsening supply chain disruptions, facing not only materials cost increases and scarcity but also sudden spikes in shipping costs.

“It’s as insane as I’ve seen it in the more than 30 years I’ve been in the business,” said Rob Webb, president and CEO of Southwestern Suppliers Inc., a wholesale distributor of building materials and an independent rebar fabricator. “We’re staying on top of material costs by having a tremendous amount of inventory which gives us some latitude to distribute costs over these commodities…but there’s very little margin to work with. Ever since Covid, it has been a delicate balance between having material with extremely high costs or being out of material. It’s like going to the restaurant and ordering the grouper at market price. It’s at ‘today’s price,’ no matter what that is, plus a premium.”

One year ago, Webb’s company challenged its manufacturers and shippers with “enough is enough” and said no to a $20,000 shipment of material carrying a $5,000 freight cost. “That cost ultimately increased to $15,000 when it came time to ship,” Webb says. “We found ourselves getting to the back of the line, paying a higher price for the material and paying a much higher cost of freight. That’s what we learned the hard way.”

Ocean freight costs have spiked even more, with dependability of arrivals a rare thing, according to Webb. “Even with a new arrival notice from overseas, where we’d ‘normally’ have had three to five days to clear customs and be ready to go, now we’re seeing three to five weeks and we still don’t have the assurance we’re going to get the shipment,” he said. “For a while we were able to blend new costs with old costs, but now we’re running out of materials period so we’re having to take significant stair-steps with costs.”

Negwer Materials says strong communications, realism and precise preconstruction timeframes enables the company to equip customers with the adequate quantities and types of materials they need when they them.

“In many respects, it’s akin to the toilet paper scenario of a few years ago,” said Pete Wilhelms, vice president of marketing and product development. “The challenge for us is vetting each project-specific request and pinpointing the dates as to when the products are needed. The pre-planning our customers do really helps us out. But it’s when surprises come about, or embellishments as to when the product is needed, that create issues. If contractors are ordering materials earlier than when they truly need them, that wreaks havoc in the distribution channel because trucking is also tight.”

The two principal distribution network components – manufacturing and trucking – must be working in sync, now more than ever before, says Wilhelms, or every entity in the channel is impacted.

“If a customer tells us, ‘We need it on May 1,’ then everything is built into the channel to make that date,” Wilhelms said. “If the customer later says, ‘Now we don’t need it until June 1,’ that slide could hit the distributor or the manufacturer if it’s a direct shipment to the site, or it could hit the installing contractor. If the installing contractor can’t store it at the project site, the product may have to be trucked to and stored in a warehouse. It’s a ripple effect.”

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



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.”

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


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.”