Beyond the Build

Commodities Pricing

So, Why Is All of This Happening?

In the real estate world, commodity pricing is  a hot conversation.

There was a point this year that dimension lumber was up about 300%, with a bright spot that it’s now back down to summer 2020 prices. Plywood and OSB have been a bit more stubborn. Copper is up 43%. In steel, deck and joist pricing is up about 300%. Structural is up too, but not by quite not as much. Most everything that touches the walls in the commercial construction is built with metal stud framing, so steel is certainly a major culprit. Concrete and gypsum prices, which had been stable, have risen, but not as dramatically as other commodities.

Breaking down the layers and the reasons:

Copper comes largely from South America, where the pandemic is still raging, so production is low. Many state-side manufacturing facilities slowed down during the pandemic and then came back with phased capacities. Production has not recovered to pre-pandemic levels, and because of increased demand, inventory is very low.

There are labor shortages at every stage of the supply chain, from mining to factories, trucking and all through the process.

There are high tariffs on imports as well, and it’s hard to get materials from ports or manufacturing facilities to job sites.

Because the single family housing market is so hot, many manufacturers have shifted their focus to supply specific needs, neglecting products we need in commercial construction and creating shortages.

Weather has also been a major factor. We had several hurricanes, “Snowpacalypse” and wildfires that either destroyed manufacturing facilities or halted production for a period.

Passing this information along to our customers might not solve the problem, but it should at least aid in understanding the complexities. The good news is that this will not last forever. As economist Herbert Stein (Ben’s father) once said, “If it can’t go on forever, it will stop.”

{Image Source, and a good way to track lumber prices}

Merrill Stewart Jr.

Merrill Stewart is Founder and President of The Stewart/Perry Company, a commercial building contractor based in Birmingham.