2023 Construction Materials Supply Chain Trends
Estimated reading time:听7 minutes, 45 seconds.
If you could sum up the construction supply chain in one word, it would be 鈥渦npredictable.鈥� Commercial construction companies and their customers have dealt with ongoing challenges since 2020, leaving everyone wondering if they will ever see a light at the end of the tunnel. Though the supply chain remains volatile, 2022 brought some changes that indicate we鈥檙e heading in the right direction, albeit slowly.
Experts from 必威体育官方APP下载鈥檚 estimating and construction management teams provided insight on U.S. trends they鈥檙e observing in Q4 and what they anticipate happening in 2023.
Factors Affecting the Construction Materials Supply Chain and Prices
Numerous factors can cause construction material supply chain disruption. Here are some of the variables that influenced the supply chain in 2022 along with local and global supply chain predictions for the coming year.
Transportation
Skyrocketing fuel costs affected transportation costs in the summer of 2022, but fuel听prices听have stabilized and are anticipated to remain stable or decrease in 2023.听However, the logistics of transporting materials will likely remain a challenge due to driver shortages, especially for construction sites in more remote areas of the country.
Labor Shortages
Labor shortages had a significant effect on construction material cost and availability nationwide. For example, a supplier might have access to raw materials, but lack labor to process and transport them. These shortages, combined with an uptick in construction, have resulted in trade partners being more selective in which projects they choose to work on.
Going into next year, workforce shortages will continue to affect different levels of the supply chain, from collecting and processing raw materials, to production, manufacturing, and transportation.
Extreme Weather Events
Flooding and catastrophic weather events caused major supply chain disruptions in 2021 and 2022. With Hurricane Ian devastating areas of Florida in late September,听we could see price increases and material shortages for timber, drywall, roofing insulation, and other materials utilized in both residential and commercial construction projects.听It鈥檚 tough to anticipate when this will happen and to what extent the construction supply chain will be affected.
World Events
Russia is a heavy copper producer and Ukraine is a major exporter of metals and other raw materials. The war in Ukraine both created supply barriers and triggered an increase in the export prices of materials like copper and aluminum.听As the war continues, we can expect continued shortages and price increases for these and possibly other commodities.
Alternative Material Use
Alternative material use ramped up when we experienced shortages of steel and other critical construction materials. Unfortunately, that caused additional supply chain issues. 鈥淪carcity of one material requires you to seek alternatives. Then you鈥檙e placing stress in other spots and causing a ramp-up in demand there. If suppliers aren鈥檛 prepared for that increase in demand, then you start seeing shortages in certain alternative materials,鈥� explains Josh Rudolph, a senior planning and scheduling manager. 听
The popularity of听alternative materials has听caused prices of products like steel to trend down in an effort to sell more product.听And we鈥檙e likely to see that trend continue into 2023. Clark Taylor, VP of estimating explains that 鈥渃ommodities don鈥檛 want to price themselves out of the market鈥攖he availability of alternative materials in the marketplace is one pressure they often respond to.鈥�
Commodities don鈥檛 want to price themselves out of the market鈥攖he availability of alternative materials in the marketplace is one pressure they often respond to.
Construction Material Supply Chain Projections
鈥淪upply chain is a commodity-by-commodity discussion,鈥� says Clark. 鈥淎 lot of materials have stabilized in terms of pricing, but we anticipate seeing continued upward pressure on some material prices because demand is still strong. However, as kinks in the supply chain begin working themselves out, it will help tap some of those prices down a bit. As prices stabilize, we expect year-to-year inflation to settle closer to historical norms of 3-5% per year鈥攊n 2023 we should plan for around 6%.
The past few years of the supply chain in the construction industry have shown us that nothing is guaranteed. A single event can further disrupt an already volatile construction material supply chain. However, we as an industry can make predictions based on patterns and trends over the past year related to construction material costs, availability, and lead times.
Steel and Structural Steel
Steel is starting to look better in price and availability, including a reduction in the cost per ton for structural steel. Even with these improvements, prices will remain higher than what they were pre-2020. 鈥淚 believe we鈥檙e starting to see steel trend down because people started seeking alternatives. If the prices come down, more people will start using more steel again,鈥� says Dave Green, estimating manager.
Aluminum and Copper
While copper supplies were relatively stable throughout 2022, there are indications of a copper shortage, which would cause prices for that material to go up in Q4 and heading into 2023. Copper鈥檚 volatility stems from multiple factors; not just the war in Ukraine, but also instability in China. Aluminum will remain a high-demand commodity but is showing signs of stabilization.
Mechanical and Electrical Products and Components
Strong demand stemming back to 2020 caused semiconductor and material shortages that heavily impacted lead times on generators, switch gears, and electrical components. Expanded production and efforts to reshore听some semiconductor manufacturing will hopefully help stabilize the supply for 2023, but it will take a while to recover.
鈥淟ead times for many mechanical and electrical products are still several months to a year or longer out,鈥� says Jessica Rabbach, senior superintendent. "It will take time for things to turn around and unfortunately, we anticipate these challenges continuing into 2023.鈥�
鈥淭hese electrical component shortages and long lead times were unheard of in previous years,鈥� explains Josh Rudolph, senior planning and scheduling manager. 鈥淲e鈥檙e seeing 80-week lead times on 2MW generators, which until recently, weren鈥檛 even a commonly used product outside of hospitals and large medical facilities. It鈥檚 likely to get worse before it gets better.鈥�
Wood and Timber
Lumber appears to be under control, and we don鈥檛 anticipate seeing another price spike as we did a year ago. However as indicated earlier, rebuilding efforts after Hurricane Ian could affect supply levels and pricing due to demand.
Roofing Insulation and Materials
Commercial roofing materials like insulation and fasteners were difficult to get and had long lead times in early 2022. Things have now stabilized, and we anticipate that continuing into the next year.
Forecasting Supply Chains in the Construction Industry
Dealing with a volatile construction material supply chain adds another layer of complexity to projects. There鈥檚 no room for error in scheduling and builders need to take the initiative in managing not only their own procurement schedules but those of their trade partners.
Construction jobs have also been substantially over budget due to price fluctuations. As a result, builders and their trade partners must find creative ways to bring costs down through value analysis and identifying alternative materials. However, sometimes, added expenses are necessary to meet tight project deadlines.
Despite everyone鈥檚 best efforts, we are all at the mercy of 2023 supply chain activity. As commercial builders, the best we can do is take a proactive approach to procurement and scheduling. We must remain flexible and understand that sometimes, delays will be completely unavoidable.
必威体育官方APP下载 project teams pride themselves on finding creative ways to navigate complex supply chain challenges. By staying on top of industry cost trends and implementing best practices, we help keep our customers鈥� projects on schedule. Learn more about our process!
Supply Chain Insights From 必威体育官方APP下载 Professionals
Custom mechanical equipment has 1+ year lead times right now. In some cases, this is longer than it takes to build an entire building. So, you might need to delay starting construction or extend the completion date because you won鈥檛 receive critical mechanical components in time. It鈥檚 a frustrating situation for both builders and their customers. While we can鈥檛 always avoid these delays, we do everything in our power to find a solution.
Forecasting tools are critical because there鈥檚 often a distinct difference between what a customer thinks something will cost, and what it will actually cost. Our dashboards allow us to plug in decades of escalation data and consolidate that information into intuitive reports. Then we can share that data with the project team and our customers to help make informed decisions on construction material pricing.
In this market, you have to be a 鈥榮queaky wheel鈥� if you want to ensure trade partners meet their delivery dates. Failure to be diligent in your follow-up places you at risk of things falling through the cracks and jeopardizing your project timeline.
Prefabrication will continue to be an opportunity in the commercial construction market. Using prefabricated interior and exterior wall panels has helped us complete several time-sensitive projects on time.
Nobody likes surprises, but they鈥檙e nearly impossible to avoid right now. Owners need to be resilient and flexible, and they must understand that construction partners are doing the best they can to meet project budgets and timelines in a volatile market.
必威体育官方APP下载 is a Minneapolis construction company experienced in navigating supply chain issues to keep large-scale projects on schedule. Connect with one of our Minneapolis commercial construction experts to discuss your next project!