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Supply chain chaos is driving up building costs

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Unprecedented global forces directly attributable to the pandemic, are raising the cost of building a Bermuda home.

Even those making additions or renovations may face massive price increases on some products, delays, shortages, and in some cases, no availability of the exact items required.

Pandemic-related supply chain issues have been affecting variety, availability and cost of materials normally used in construction – added costs that are being borne by the end user.

And should there be a visit from a powerful Atlantic hurricane this year, the island may not bounce back as quickly as usual – because of the shortages.

Those who discussed the supply chain issues with The Royal Gazette say this is a market year never before seen by local suppliers of building materials. And, it has gone on so long, they don’t see an end in sight.

CEO of home improvement and building supply store, Baptiste Limited, Sacha Bearden, when asked about her company’s buying experience, exclaimed: “What a mess. It’s really tough.”.

Morris Moniz, Retail Operations Manager at S.A.L. Trading Limited pointed out: “We are at the mercy of the (international) market.” He told us: “We just don’t have the buying power.”

“The cost of some PVC piping has quadrupled,” said Construction association of Bermuda, president Simon Tully.

Mr Tully said: “There’s no doubt that it is going to be more expensive to build in Bermuda. I would like to think that you would start to see some of these prices come back down, when Covid fades. But I don’t know.”

Ms Bearden stated: “I’ve always ordered the same thing over and over, again. But now that item is no longer available. A lot of companies are really struggling with the supply chain issue, and manufacturing issues. Factories now with social distancing can’t have as many people on a crew.

“They were closed down for so long and now they are trying to catch up with orders.

“There’s hundreds of thousands of containers sitting off the port of Los Angeles right now, just waiting to get offloaded. China is struggling to keep up with production demand.

“I was just in England and they are moaning about the exact same thing. I thought it was only a problem on this side of the world. But apparently it is universal.

“So, I just buy what I can. Instead of buying three different types or colours, only one is available. You have to buy three of the same.

“Prices for certain commodities like wire, lumber are through the roof. Aluminium has doubled in price. For doors and windows, the raw materials they are made of have doubled.

“We buy extrusions and every single time we order, the price goes up. We can’t pre-sell items, because we then can find out the price is 50 per cent more by the time it lands.

“We have to quote everything before we sell anything. We used to have a formula for pricing special items, where we can look things up in a catalogue. But now you have to ask the manufacturers each time for a firm quote, before you can quote a customer.”

Mr. Moniz said: “There have been increases particularly in lumber and a lot of hardware, depending on what materials are required to make them.

“We’ve seen increases of sometimes 50, sometimes 70 per cent; and for some things, more than that. Two-by-Four, spruce and plywood, we’ve been getting these things out of the Middle East and out of China. The schedules are just ridiculous. The freight rates have easily doubled.”

Mr Tully is with Eff-Tech, a mechanical contractor specialising in heating, ventilation, and air conditioning (HVAC) solutions and fire suppression systems.

He agreed that much of the process of moving raw items to manufacturers where they are used to produce building items has been affected. Everything has slowed down.

He said: “The freight rates are going up, affecting the cost along the supply chain. I’m not talking about shipping to Bermuda.

“It’s the vendors’ freight rates, and they are passing that cost on down the line. And you also can’t get the materials in a timely fashion.

“They cannot move the product quick enough, so things are sitting in warehouses. It costs to have things in warehouses when they can’t be moved, and those costs are added to the price, and passed down the line. The prices have become extortionate.

“Everything is going up. The cost of some PVC piping has quadrupled. We have to increase prices to keep up. A lot of air conditioning items have gone up. Something that used to cost us 15 cents each, has now gone up to 80 cents.”

Mr. Moniz said the pile-up of cargo ships at the ports are particularly troubling. The ships have increasingly long waits to get berths to offload cargo.

He said: “There are 30, 40 ships coming out of China waiting in a line to get into a west coast port. A lot of places have less staff because of Covid restrictions, and people who haven’t come back to work. Everything is backing up. You have shortages everywhere and the prices have gone through the roof.

“This will drive the cost of building up. We’re finding some hardware items that are marginally up, but you have items like lumber that have become a problem.

“We are choosing not to buy some things because we won’t be able to sell it at the prices we will have to pay.

“I am fearful of the thought of a bad hurricane year, because there are a lot of materials that are just difficult to get.

“The entire industry has just seen constant price increases for some time. Earlier, the increases were reasonable. But in the last eight months to a year, there have been really large increases from the suppliers. And some stuff, you just can’t get.

“The fill rates for orders we place are normally like 80, 90, some times 100 per cent. But now they are like 30 to 50 per cent. The orders are well short of what you require.

“You get an extension cord that has now doubled in the price. Why? Because it’s made of copper and the price has gone up, but so has the price of freight.

“If you are building in Bermuda, you are likely to be OK with concrete block, with just a slight price increase; but lumber or plywood? No matter the vendor, and the time frames are a lot longer, so our lead times are longer and the price has gone up drastically.

“We get some plywood out of Brazil, where it might take two to three months. But they are now saying it won’t be any less than four months and could be as long as eight months.

“The market has sometime become tougher, with a hurricane hitting the Caribbean or the US. Some spruces may then be hard to get. But that normally recovers quickly once the mills get busy.

“But this has been persistent for a while, including the price increases. This has proven that it‘s not going away quickly. You have a lot of warehouses with less staff because of Covid restrictions. It just slows things down.

“There’s no doubt that it is going to be more expensive to build in Bermuda. I would like to think that you would start to see price reductions if Covid fades.

“But in Bermuda, we just don’t have the buying power. Our numbers are too small. We are at the mercy of the market, the suppliers. You hope the price will go back down.”

Ms Bearden added: “Our prices have been going up for a year, now. I’ve struggled to get things that we used to take for granted, things that would be in stock – like windows. Things have become way more expensive to buy and there are longer lead times.

“We’re catching up now, but it is still getting the materials and getting them here.

“There are trucking delays in the United States. Just getting room on a truck to move things is difficult.

“We used to say seven days out of the factory, seven days to the pier and two weeks to Bermuda. I could tell people that I could get them items within a month. But now, I can’t give any date.

“The suppliers serve the big box stores first and the smaller you are, the lower down the food chain you are for getting materials. We’ve really struggled.

“Offshore Louisiana there are oil rigs. Oil is what is used to make PVC … so (the devastation from Hurricane Ida) will drive up PVC prices, yet again.”

A growing mountain of shipping containers in the Port of Tacoma is the latest pandemic symbol
Morris Moniz, Retail Operations Manager at S.A.L. Trading Limited
Construction Association:Simon Tully (Photograph by Akil Simmons)
Baptiste Limited CEO Sacha Bearden: Prices have been going up for a year (Photo by Akil Simmons)

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Published September 07, 2021 at 8:09 am (Updated September 08, 2021 at 8:03 am)

Supply chain chaos is driving up building costs

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