Rising prices of building materials: industry players speak out
26 May 2021
The rise in wood prices has been the talk of the town for the last few months, but a new reality has hit the construction industry. It is now the price of a wide range of building materials and hardware tools that are skyrocketing.
As a contractor or consumer, are you worried about the consequences this situation can have on your various construction and renovation projects? Are you afraid that you won’t be able to complete them? No need to worry! We will help you understand the current situation a little better, so that you can make the best possible decisions regarding your materials’ price increases.
What is the reason for the sudden increase?
This phenomenon has been felt primarily since the beginning of the Covid-19 pandemic. The health crisis and the restrictions have allowed homeowners to have the necessary funds to carry out certain renovation projects. Thus ultimately, this incomparable demand has caused the demand for materials to explode. In a survey recommended by AQMAT, 65% of building owners, ranging from all types of buildings, have made renovations in 2020. In 2021, 66% of them intend to make renovations or to have them carried out by a contractor.
Add into the mix the lack of staff and 50% reduction in production capacity, and it’s clear that sawmills and manufacturers cannot keep up with the demand. As a result, building materials are becoming scarcer and the principle of supply and demand is playing a direct role in the increase in prices. A survey conducted by Léger, explained that 42% of contractors stated that they have experienced a 20% increase in work since March 2020.
Also, it isn’t only production that is affected, all these materials must also be delivered. We are currently experiencing much longer delivery times than usual for imports and supplies. According to Richard Darveau, President and CEO of AQMAT, the cost of transporting materials has also increased by 200-300 percent.
Stéphanie Chartrand, president and interior designer at Espazio Design, says she has experienced some problems with procurement. “Several materials and products that were supposed to be in stock during the design phase were finally out of stock during the construction phase. The design is therefore compromised because it isn’t what we originally wanted. Deliveries have a longer than usual waiting period, which can go from a few weeks to a few months. That can result in a project delivery without an office door, for example.”
Which materials are the most affected by the increase?
In addition to wood prices nearly tripling since last year, steel prices have more than doubled from last fall. In fact, the average delay for ordering steel structures is now at least 4 months whereas before, it was only a few weeks .
Moreover, gypsum panel supply is starting to become problematic. According to Claude Bertrand, an employee at BMR, there is a serious shortage of gypsum which leads to significant delays in supply. Many contractors are even looking for supplies abroad to meet their needs.
Unfortunately, that’s not all, since there is a shortage on many levels, other materials most affected by supply problems are windows and doors, lumber, plywood and OSB, roof trusses, joists, engineered wood products and plumbing supplies. Aluminum, concrete and asphalt shingles are also on the list, but to a lesser degree.
What are the direct impacts of the increases?
Faced with these various problems, contractors are concerned that material prices will escalate too high and will exceed customers’ budgets . They can no longer guarantee their bid prices to clients and project delivery dates.
“The unpredictability of costs and delivery times make customers insecure and won’t allow us to confirm final delivery dates. We see delays on imported products, not to mention the extra time and hassle, but customers are usually understanding,” says Nicholas Lacroix, president and founder at SPACIA.
The most frequent impacts related to procurement were also highlighted in the Léger survey. Eighty percent of contractors confirmed that they had experienced additional delays, 29% had to change suppliers and 23% were forced to substitute materials.
Who is absorbing these price spikes?
The pressure is enormous for contractors and buyers alike, but whose responsibility is it?
“Absorption of additional costs depends on the type of contract signed. Currently, subcontractors and suppliers add a clause that says they are not responsible for price fluctuations and material availability, so the risk transfer is often passed on to the client. Transparency is required in this context,” explains Lacroix.
Because of this increase in materials, many clients are unfortunately postponing their projects or even abandoning them to avoid losses or due to inability to pay. Contractors want to serve their clients first and foremost, according to expectations and agreed-upon deadlines, but this is becoming increasingly difficult.
“In many cases, it’s the client who ultimately has to pay more for their work. Budget estimates for projects that were anticipated a few months ago have to be revised upwards and this is considerable for the client. It puts the whole project into question. It is either cancelled, done in several phases to spread over more than one fiscal year or the scope of the work is reduced,” says Stéphanie Chartrand.
Conversely, Guillaume Bourdon, founder of Giga-Site, explains that in some cases, the profit margins of certain contractors are reduced. This would be the case for lump-sum construction projects where the contractor must assume the increases in materials that he is responsible for purchasing for his clients.
A little advice in closing
The construction and renovation industry is booming and will continue to do so in the coming months and years. However, it is impossible to predict what will happen with this price increase and the various repercussions of the current pandemic. With the arrival of summer, a generally very busy time for the construction industry, here are our tips:
- Plan your projects as early as possible and estimate longer time frames to avoid unpleasant surprises.
- Plan for a larger budget than previously estimated to be able to cover the costs of your project, which could be at least 10% more expensive.
- Since the price lists used for estimates are not regularly updated and do not display volume discounts, it is difficult to trust them in the current context. Guillaume Bourdon who created the Giga-Site application, the “Marketplace” adapted to the construction industry, quotes “We guide construction contractors to request prices from multiple suppliers on a single site, so they get prices adjusted to their needs, i.e. their territory, their work date and their quantity of materials.”
Have a project in mind? Our turnkey services make us your best ally for all your construction and renovation projects. We follow you from the beginning to the end of your project and we do everything in our power to help you in this most difficult period. Your satisfaction is our priority!
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