Since September 2020, commodities used within the construction industry have skyrocketed in price. Steel, aluminum, gypsum/drywall, lumber and glass have faced cost increases up to 200 percent. According to the London Metals Exchange, 12-month flat steel futures (steel used for appliances and automobiles for example) have increased more than 70 percent since October 2020 and aluminum billet has increased nearly 40 percent over the same period. Gypsum prices have climbed sharply and are expected to increase another 10 percent by end of Q1, 2021, as residential construction remains strong.
As our economy recovers from the effects of the pandemic, these commodity prices are affecting manufacturers and distributors of construction products. Janesville, Wis.-based Hufcor Inc., a global supplier of operable partitions that provide flexible space for hotels, schools, and many commercial projects is no exception.
“Our moveable partitions are made primarily from steel and aluminum. The pandemic has delayed many projects, including those that were sold pre-pandemic are starting up again with drastically different cost structures,” says Clint Morgan, Hufcor’s chief operating officer. “Due to projected futures costs for our core commodities, we may be forced to increase our prices as much as 15 percent to offset these costs throughout all of our global facilities.”
General contractors and construction managers are also feeling the pinch as many suppliers have been forced to increase prices over the past few months. Projects that were budgeted in 2019 or 2020 are costing more now that developers are releasing projects. According to the U.S. Bureau of Labor Statistics and the Producer Price Index (PPI), overall construction costs have risen 10 percent year-over-year compared to February 2020 and overall project costs are starting to climb as a result.
Higher costs, supply chain disruptions and increasing fuel charges are all factors facing the commercial construction industry moving into 2021. As 2020 taught us, solid planning, patience and perseverance is key to ramping up during the post-COVID economic recovery. Hufcor will be working diligently to manage through this time and it is excited to see a market recovery within the building and construction industry.