The Status of the Construction Supply Chain
To put it very simply, construction materials are in short supply. Natural disasters, manufacturing and production setbacks, logistical bottlenecks, labor shortages, as well as political instability have conspired to produce what several sources call a “perfect storm” of delays and frustration for general contractors. Domestic instability and global politics are at the forefront of the biggest threat to recovery for the construction industry, which is the sourcing of building materials.
CONSTRUCTION SUPPLIERS
Many companies in the construction materials supply chain remained closed at the beginning of the lockdowns, either because they were deemed nonessential, or as the result of other restrictions. While many construction suppliers have resumed their operations, they have not seen their capacity reach pre-pandemic numbers due to a shortage of workers. This was most evident at the Port of Los Angeles where the Biden Administration just negotiated a deal to keep the port open 24-hours a day and for seven days a week.
TARIFFS ON STEEL AND OTHER BUILDING MATERIALS
New tariffs have put a strain on supply as well, adding extra pressure to the daily operations of most general contractors. There has been speculation that the Biden administration will ease or even eliminate European and Japanese tariffs on steel, while keeping the Chinese tariffs in place. If these tariffs are lifted, it should alleviate some pressure on general contractors to source steel products.
HOARDING OF BUILDING MATERIALS
Many construction firms have been hoarding materials instead of relying on “just-in-time” delivery, further adding to their scarcity.
HOARDING OF BUILDING MATERIALS
Many construction firms have been hoarding materials instead of relying on “just-in-time” delivery, further adding to their scarcity. Seventy-five percent of construction firms experiencing project delays cite shortages of building materials and delivery delays as the main reason. Non-government projects may also have a hard time sourcing building materials with the recent passage of the Infrastructure Investment and Jobs Act.
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