0

‘On Fire’ Materials To Hit Construction

photo

Leonard Sands

photo

Stephen Wrinkle

• Consumers told: Brace for ‘hit to pockets’

• Key product prices up 10% since New Year

• Lumber ‘out of control’ and rising every week

Contractors yesterday warned their home building clients face “a hit to their pockets” in 2021 from an “on fire” construction materials market where prices have risen ten percent since the New Year alone.

Two former Bahamian Contractors Association (BCA) presidents confirmed that the industry was set to pass these cost hikes on to developers and homeowners when new building contracts were agreed this year.

Both Leonard Sands and Stephen Wrinkle blamed the raw material price rises on COVID-19, which created a supply backlog when factories were shutdown amid lockdowns and staff were furloughed. While overseas suppliers, especially in the US, have resumed production, manufacturers and supply chains are still struggling to catch up with global demand.

Product scarcity has thus pushed up costs, with Jamaica and other Caribbean countries complaining that imported lumber prices have gone up 60 percent since summer 2020. Mr Sands said The Bahamas was “consistent” with such trends, although he pegged local lumber price increases over the same time period at ten to 15 percent.

Building materials suppliers, meanwhile, yesterday disclosed that plywood and treated lumber prices were “increasing every week and are totally out of control”.

“Anthony Roberts, City Lumber Yard’s general manager, told Tribune Business: “What we are seeing is that the commodity markets for lumber are at record highs. The plywood market and treated lumber market is just on fire. The prices are going up every week and it’s totally out of control.

“Sales are bigger because a piece of plywood today costs $30, and tomorrow it costs $40, so your sales increase. But as far as profits, we’re working with the same margins, and competition is also fierce. Everyone is trying to keep the prices down as best they can. We try to average the prices when they go up and average when they come down.”

Mr Roberts warned that there are also “availability issues” with certain products such as hardy panels and shingles, which are “difficult to get” right now. “This has been driven by the construction demand primarily in the US as well as here,” he said.

“I think all of the lumber and building material places are busy, but in the US the whole COVID-19 thing did not depress the lumber in building material markets. It seems to have had the opposite effect.”

With COVID-19 lockdowns forcing many persons into home improvements, Mr Roberts said suppliers were informing him the plywood market has “peaked” and they believe other materials “can’t possibly go any higher”.

He added: “I’ve spoken with the different suppliers, mills and large wholesalers. And they are sort of in awe of what’s going on. They’re saying that it just can’t go any higher. The plywood market seems to have peaked, but it’s not coming back down. It’s kind of holding because of a very large demand.

“The wholesalers and the plywood mills, they just can’t supply for the demand, and that also is a factor in keeping the prices high. In The Bahamas, we’re a busy little market but we’re just a drop in the bucket when you compare us to the whole Southeastern US, and they are having the same issues over there as people just can’t supply the plywood or any material. Everyone’s having to pay a premium.”

Mr Wrinkle echoed Mr Roberts, telling Tribune Business: “We have several suppliers State-side in particular that have gone up 10 percent in the New Year on windows, doors and lumber; generally across-the-board. There’s been an increase, and we get 90 percent of our supplies from there. It also trickles down to the suppliers here.”

He added that “we’re all paying the price” for COVID-19’s economic fall-out, with the lockdowns and other restrictions imposed by the pandemic leaving “manufacturing backlogged”. The ex-BCA chief said: “When they returned, the supply line lacked the capacity to meet demand because they had closed some plants and let some people go.

“On the major items we’re seeing that kind of mark-up turn into 20-25 percent increases locally because we have to pay the FOB (Freight on Board) charges. The freight charge itself is not as detrimental as the soft costs like insurance, wharfage and VAT.”

Mr Wrinkle said the greatest increases had been seen in manufactured products such as plywood, adding: “We’ll have to find new ways to maximise material usage. It’s supply and demand. Demand went to zero, now it’s coming back up and supply is having to try and catch up.”

He revealed that he had been informed by a US supplier at Christmas that the delivery of windows will take between three to six months, as he warned that Bahamian contractors “don’t have much room” to absorb these costs rather than passing them on to clients.

The rapid construction material price hikes are not want residents of Grand Bahama and Abaco, still struggling to rebuild from Hurricane Dorian, will want to hear. And any cost increases will generally not be welcomed in a COVID-19 ravaged economy where construction, given its ties to real estate-based foreign direct investment (FDI) projects, is being viewed as a key stimulus generator.

Mr Wrinkle, voicing optimism that prices might stabilise by Spring, told this newspaper: “It’s a chore. We’ve had to go to several sources to find materials, when we could usually go to just one or two sources. The world has changed. We’re part of it, but this is a big cost centre and we will feel it doubtless. What can we do?”

Mr Sands, meanwhile, said the brunt of 2020 construction material cost hikes had been borne by contractors as building contracts and their pricing had already been agreed, and could not be changed. However, he warned that the hikes will now likely be passed on to customers - meaning developers and homeowners - in new contracts that are signed this year.

“They’re stuck with the cost and can’t avoid it,” Mr Sands said of contractors on existing jobs. They can’t pass it on to anyone and will have to eat it. With new contracts there’s an opportunity to make adjustments on price, but for contracts ongoing they’ll just have to absorb the cost. You can’t go back and renegotiate the contract because the market has changed.”

He warned, though, that construction industry clients will “take the hit” and “feel it” in any new contracts that are struck. The ex-BCA chief, though, said present materials pricing will “not have a noticeable impact”, although further consistent increases could pose a problem and the situation needed monitoring.

Gary Burrows, Tops Lumber and Plumbing’s general manager, confirmed the price increases impacting The Bahamas as a result of events in the US market.

He said: “We had a situation where we were ordering PVC pipes and so forth, and the company called us and told us they couldn’t supply the pipes at the time, but that was about four weeks ago. There are still a lot of shutdowns in the US and that is causing prices to go up.”

Comments

Dawes 2 months, 4 weeks ago

I am sure they passed on the duty reductions last year so the effect will make the goods about the same as before the duty reductions.

0

DWW 2 months, 3 weeks ago

demand rose after the high number of major hurricanes in our region last year. the demand increase was precipitated by Dorian and then compounded by the major landfalls in Louisiana, honduras, etc.

0

JokeyJack 2 months, 3 weeks ago

I have no sympathy for people who have money to build and improve houses at this time. Most people are scrapping for bread for their mouths and a place to sleep away from the mosquitos. Can't get windows? Staple some screen across the whole and shut ya mouth.

0

Sign in to comment