Q&A with Paul Neidlein of JE Dunn

Q: We’ve heard a lot about the supply-chain problems this year, especially as they relate to the construction sector. Is there concern about materials availability becoming even more restricted as we head toward 2022?

A: The supply chain, globally, continues to wreak havoc on material availability and lead times.  Currently there are over 4 million shipping containers sitting anchored at ports across the world, many of which contain construction materials. There are several factors that have led to this situation, namely: ports continue to operate at 60-70 percent capacity due to a longshoremen shortage, on-going COVID-19 complications, and union negotiations.

Q: Some of what’s going on involves changes in shipping dynamics, as well, right?

A: Container ships continue to grow in size; five years ago the average container ship hauled 18,000 TEUs (Twenty-foot Equivalent Units), while the new Ultra Large Container Ship Class (ULCS) is now hauling 24,000 TEUs.  This 33 percent capacity increase has led to extended unload times, which compounds port processing delays.

Q: Even at the point of unloading those ships, aren’t there other complications?

A: Additionally, ports and warehouses are at maximum capacity for storage and have no place at which to even unload containers. The entire western half of the U.S. is now down to all-time low of 3.6 percent warehouse vacancy. Containers are stacking up at ports and warehouses, which is leading to an expansion of storage yards; the Port of Savannah has a $706 million expansion under way, but this additional capacity is still 18 months from completion. This issue is in large part to trucking complications. Containers, trucks, and chassis’ are in short supply. Semi-truck production is running at an 11,000 units/month deficit and container chassis’ are running at a 9,000 units/month production deficit with production normalization not anticipated until sometime in 2023. So, yes, we are concerned about material availability issues throughout 2022 and beyond.

Q: Supply chain has clearly contributed to the higher pricing of construction materials, but some other factors are driving things up. What are the most significant?

A: Overall commercial construction commodities continue to rise, albeit at a slower rate than the almost 10 percent escalation witnessed in the first two quarters of 2021. … We are seeing an impact on other construction materials. For instance, steel prices have escalated 90 percent from September 2019 prices. We are experiencing as long as 12-month delays for long-span joists, eight-month delay for small bar joists, 5-6 months for steel deck, 5-6 months for wide flange and tube steel.

Q: What’s the source of demand behind those trends?

A: These delays are driven by increased eCommerce demand and subsequent 400 percent increase in warehouse construction, continued steel tariffs, reduced import levels of steel due to Chinese domestic consumption, and a nine-month backlog of steel demand from 2020 closures. We are strongly recommending early engagement (9+ months!) with owners and their design teams to determine steel framing sizing for major members and to lock-in spot in production line is required to maintain schedules.

Q: And for other materials?

A: In regards to roofing and insulation, we’ve seen a 20 percent escalation for insulation from pre-pandemic 2019 pricing. There are as long as 10-12-month delays for TPO roofing and Poly-Iso insulation. Delays and pricing increases are driven by production issues from Texas’ winter storms in February, and are requiring system rebuilds of manufacturing industries using petroleum-based products. Alternative approaches and material selections are both options for current construction projects.