7 Ways Rising Material Prices Will Impact Your 2021 Roofing Project
It’s not an easy time to be a contractor. On top of a construction labor shortage and the challenges of keeping workers safe during a global pandemic, now material prices are skyrocketing.
According to the Associated General Contractors of America (AGC), prices dipped at the beginning of the pandemic, “but have diverged sharply since last April,” explained Ken Simonson, the association’s Chief Economist, on March 12, 2021. AGC went on to report, “A government index that measures the selling price for materials and services used in new nonresidential construction jumped 1.9 percent from January to February and 12.8 percent since April 2020.”
This isn’t news to D. C. Taylor Co., whose Vice President Procurement & Logistics Jon Reiss has been experiencing it firsthand. “The majority of pricing on roofing products has risen between 5 and 15 percent. The G90 galvanized and stainless steel flat stock that we use in our edge metal has risen substantially and changes daily,” he says. “Stainless prices have risen over 50 percent compared to last year.”
In addition to the price increases, there are also product shortages and delivery delays. Contractors are having to getting creative. “We’ve taken materials from one project to use in another and then replenish them as they come in. Or we may order material in to house in our warehouse,” says Reiss.
Causes of Material Price Escalation
A combination of factors and events have led to material shortages, delivery delays, and higher prices.
Without a doubt, the COVID-19 pandemic is the largest contributor to the problem. Pandemic-related supply chain problems range from slowed production to stalled ocean freight off California’s cost. Trade tariffs on steel and lumber are also a factor.
Mother Nature can shoulder some of the blame too. The wildfires in the west impacted manufacturing and closed essential transit routes. The power grid problems in Texas after a record-setting winter storm wreaked havoc on U.S. polyolefin capacity, a key element in TPO single-ply membrane.
With reality setting in that material shortages could cripple contractors’ abilities to perform scheduled jobs, many rushed to buy up what stock they could find so they had ample inventory to keep working.
Exacerbating these problems, is the enticement to perform big ticket upgrades on commercial buildings right now. A change to the Section 179 deduction in the 2020 Tax Cuts and Jobs Act, enables a building owner to deduct up to $1 million on their income taxes as an expense in the first year rather than depreciating it over multiple years. This has resulted in many roofing projects that may otherwise have been postponed. “This legislation has created a cash flow positive situation,” explains Brent Taylor, President, D. C. Taylor Co., Cedar Rapids, IA. “Companies are investing in their facilities right now.”
What All This Means for Your Project
These challenges will also be felt by roofing customers. Here’s how.
- The cost of your project will be higher. With material prices increasing, it’s no surprise that the bids and proposals will reflect it. Contractors may even be putting on some additional mark up to cover their expenses if material prices continue to escalate.
- The roofing project may be very different than what would have been suggested a year ago. The roofing system that’s proposed by your roofing contractor may be influenced by the high cost of some materials (e.g. opting for fully adhered vs. mechanically attached based on the cost of fasteners), certain manufacturer’s pricing (proposing one manufacturer over another), and availability concerns.
- The price quoted isn’t guaranteed for long. Don’t expect the contractor to give you a price for a project that’s six months out. They can give you a budget estimate, though. The proposal price you’re quoted may only be guaranteed for 30 days.
- The contract may contain a price escalation clause. “Some customers want a quote for 90 days out. We’re asking vendors for 90-day pricing or we’re putting price escalation clauses in the contract,” explains Reiss.
- Prepare to change the scope of work or phase the project. “If a customer can’t absorb a 15- to 20-percent increase in materials, we need to get creative and do portions of work instead of the entire roof area or various sites at once,” says Reiss.
- Consider storing roofing materials onsite. If you have the space to house project materials for a few months before the crew can arrive to do the work, you may end up saving money on materials.
- The project timeline may not be very flexible. Once your contractor gives you an expected window when the project will be completed, don’t think they can start it a few weeks earlier than planned. “The lead time for ordering materials is longer,” says Reiss. “Normally, we can get materials within 7-10 business days, but now ordering needs to be done 4-5 weeks out.” And if you decide to complete the project later than anticipated, alert your contractor right away so they can work with manufacturers to update and possibly hold pricing beyond quoted dates.
It doesn’t look like the situation is going to improve anytime soon. “Several manufacturers have already let us know they anticipate additional increases in 2021,” notes Reiss. But if you plan accordingly, discuss options with your contractor, and have realistic expectations, you’ll not only get a wonderful new roof, but also have a stress-free buying process.