What's up with Commodities? Everything.

Shortages Impact Construction

Lots of theories? Here are a few facts.

You’ve seen it in the news or felt it at the checkout. Shortages and supply chain issues have caused a lot of products to become very scarce and expensive (if available at all).

Just one example that impacts our industry directly: a quantity of seasoned lumber that cost $100 in February of this year peaked in May at over $350, before retreating to “only” $170 this week.

Why did lumber prices go so high?

It’s complicated.

Lumber is more volatile than many other commodities due to its close relationship to the housing industry.

During the first part of 2020, many logging operations and lumber mills in the USA and Canada were forced to slow down or temporarily close due to the pandemic.

Meanwhile, many homeowners with plenty of time on their hands decided to start remodeling or repair projects.

Then in the fall—the traditional start of peak commercial homebuilder activity—construction companies added their heavy seasonal demand to the mix, creating the perfect conditions for prices to spike dramatically in spring and summer of 2021.

What does the future look like?

On the bright side, look for prices to continue to fall. Lumber futures are falling, a clear indication that mills are reopening, and inventories are filling out.

But don’t get too comfortable yet. A return to the historical norms is a long way out.

Bloomberg predicts that continued strong demand combined with the lag time for drying and seasoning will keep prices unusually high for at least 1-2 years, with a long-term trend of prices above $500 per 1000 board feet for the next 5 to 8 years.

And then there’s …

Computer chips. Passenger and commercial vehicles. Gas and oil, thanks in part to the cyber attack on Colonial Pipeline. The list goes on.

These shortages and disruptions tend to snowball, each one causing a ripple effect that impacts thousands of other commodities—all the way down to chicken wings and—yep—toilet paper (again!).

And to top it all off, the labor market is extremely tight right now for a variety of reasons.

How has Nadler coped?

Thanks to our longstanding relationships with a wide range of suppliers, we’ve been able to minimize the impact of fluctuating commodities costs on our customers.

Our outstanding purchasing team has gotten creative. While most everyone in the industry is facing the same challenges, we’ve had success in finding alternate suppliers and rapidly adjusting our supply chains to ensure reliable sourcing of raw materials.

In addition, we are working on jobs approved with supply pricing already locked in before the dramatic run-up in prices, and for more recent projects we’ve had sufficient inventory on hand to avoid purchasing commodities at their peak.

We’re grateful that we have not yet had to raise the price of a project due to supply issues.

We have always honored quotes for 30 days, which is longer than many other companies’ policies even under normal circumstances. In these volatile times, some of our competitors have reduced their guarantee period to as little as one week. 

Bottom Line:

Plan ahead for contingencies, think strategically with a long-term focus, and be innovative and agile where critical success factors are involved.

How can we be creative for you? Contact us for your latest project with confidence.