At BORGA Steel Buildings and Components in Fowler, a shortage and doubling in the price of steel has limited the number and types of projects the company is able to bid for. Photo by Frank Lopez.

published on May 19, 2021 - 1:36 PM
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With so many businesses in different industries having to either temporarily close down, reduce operations, split shifts and/or shrink work crews in the aftermath of the pandemic, contractors and manufacturers have been experiencing supply-chain issues.

According to an October 2020 survey from Interos, a third-party risk management platform, 43% of the 450 senior business decision makers in the U.S. reported that their entire supply chain suffered some kind of interruption, ranging from fluctuations in supplier prices, safety restrictions slowing or pausing orders, the need to find suppliers in other regions due to importing and exporting restrictions and bankruptcy of suppliers.

BORGA Steel Buildings and Components, a company in Fowler that manufactures steel buildings, covers, solar structures, roofing and components for the commercial, industrial, agricultural and residential markets, has seen a steel supply shortage since the pandemic began last year.

Last December the price for hot-rolled sheet steel had doubled since early August to a two-year high of $900 a ton, according to S&P Global, an energy and commodity market information source.

Ron Heskett, CEO at BORGA Steel, said the company gets most of its steel from steel mills, but with with a reduction in the availability of materials, mills are now putting all their clients on allocations, meaning that buyers can only buy the amount in the quantities they offer.

“Even if I need more, I can’t get it. I have to go to the secondary market, and if I go to the secondary market and buy from a broker, it’s 40% more. It’s been difficult and delayed some of our projects,” Heskett said.

Heskett said he has seen a significant price increase in steel, with some of the materials seeing up to a 95% increase since the end of 2020.

There was an expectation from steel mills at that the start of pandemic, as businesses were being shut down, that there would be a drop in demand, so mills slowed their production.

The exact opposite thing happened, Heskett said.

There was an increase in demand for commercial, residential and governmental buildings.

The mills are trying to catch their production back up with demand, but it will take some time.

Heskett’s suppliers are telling him that the prices for steel will flatten out at the end of the year, but he is not hearing anything about a significant price decrease or prices even getting near to what they used to be.

With current high lumber prices, Heskett said that steel is getting into markets traditionally dominated by lumber, such as the ag industry. Steel construction for the shell of buildings is becoming more popular as prices for plyboard rise as well.

Heskett said that a plywood went from $17 a sheet to $82 a sheet, adding thousands to the cost of building a house.

With the allocations of steel from the mills, Heskett said that BORGA can’t even bid for certain products because they don’t have the steel. There are even larger companies that are reaching out to BORGA to buy steel from them.

“I do think that we are going to see an additional demand because it does feel that we are getting to the end of the pandemic and its going to constrain the time frame for materials for a long period,” Heskett said.

Brandon Cooper, president at Beam and Company, Inc. a contractor in Fresno specializing in commercial and multi-family projects, water and mold maintenance, said that after the onset of the pandemic, and with more people working from home, the maintenance side of the business saw a drop in demand as there were no people in buildings to report any issues.

With so many projects delayed last year and finally commencing this year, there is a high demand for an already low supply of resources and materials. There is a “traffic jam of projects.”

Early on in the pandemic there was a shortage on many supplies needed for construction such as doors and insulation, and with such low supplies, costs have skyrocketed, Cooper said.

Cooper said that across the board, there have been 300- 400% increases in material prices.

“I get letters from my vendors at least once a week letting us know of immediate increases in materials, which makes it harder for the builder,” Cooper said. “We bid a project six months ago where the price of lumber was 150% less. We have to do the same project today, but who is going to eat the difference?”

However, even with negotiated contracts, and fluctuating prices, Cooper said that clients are understanding of the situations caused by Covid-19, and contractors and clients are working together to keep projects moving.

Cooper said that the company went from having very little work to do, to an “unbelievable” amount of work, and projects that normally take a week may be about six weeks out.

“Talk to any builder and they will say the same thing. They’re going to be buried in work,” Cooper said.

The pandemic didn’t just stunt supply lines for building construction, but also decreased a demand for appliances and fixtures as well.

Paul Chamberlain, CEO at Linmore LED, a ultra-performance LED lighting and wireless communication solutions company in Fresno, said that the company did see a drop in business because of a demand drop in its products during the pandemic.

However, in the last month, the shortage has hit the company.

There is a shortage on components inside drivers — silicon chips and capacitors — and even though it’s just a few pieces with the shortage, Linmore’s products cannot be completed with any pieces missing.

Chamberlain said that in the last four weeks there has been a dramatic increase in prices and lead-time on componentry is four times longer than it was.

The impact will be felt in the coming months, Chamberlain said, as orders are getting delayed and the company could see a shortage of materials, not be able to full orders, lose orders and perhaps even curtail hours if there are no components to build orders with.

“We are placing more orders and larger orders to accommodate,” Chamberlain said. “Ultimately we are going to end up growing our inventory even though we already carry quite a bit. Instead of projecting out eight weeks in advance, now we are projecting four to six months in advance.”

Along with supply shortages, there are also increases in freight costs and other costs, which led Linmore to execute their own price increases mid-March, and there are talks to have a second price increase in July.

With an increase in prices, customers are more likely to wait on making purchases, which ultimately hurts everyone in the industry, Chamberlain said.

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