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Steel Industry

The Current Steel Industry Backlog – What It Means for PEMB

As Covid-19 restrictions wind down and the economic recovery steams full speed ahead, news feeds are filled with stories about the booming housing market and a subsequent lumber shortage that has resulted in skyrocketing prices and shortages across the country. But while lumber may be grabbing all of the headlines, the steel industry has been dealing with its own supply deficit, and it’s impacting the PEMB industry in significant ways.

According to an article about the current steel shortage published this month by Bloomberg, “Demand is so frenzied that U.S. mills have stopped taking orders from customers…[and] the mills may not begin taking new orders until late summer so that they can clear backlogs.” The shortages and backlog are impacting the production of everything from appliances to automobiles and have caused steel prices to skyrocket 220% in the past year. Here, we’ll explore what that means for the PEMB industry in both the short and long terms.

Short-Term Insights: High Steel Prices Now Bring an Opportunity for 2022 Strategic Planning

Unfortunately, for businesses and contractors looking to immediately break ground on projects, the outlook is not so rosy. The Bloomberg article states that the steel shortage has occurred because the industry did not expect the economic recovery to happen so quickly and did not prepare for a surge in demand in 2021. This, coupled with China’s decision to lower output in order to try and curb emissions, has created a situation in which the supply chain isn’t expected to recover until 2022.

On the other hand, for businesses setting up their 2022 PEMB project timelines, this means is the time to act is now. With the shortages pushing project start dates out an average of twelve months, this summer is the perfect time to get a head start on fall capital planning. Moving projects into bidding, budgeting, design, and engineering will ensure they are primed and ready to go when the dust settles and inventory and prices stabilize. This, in addition to locking in contractor partners, will be critical in order to meet 2022 project goals.

lighting and hvac system

Delayed PEMB Projects May Present an Opportunity for Investing in Existing Building Improvements

The delay in new building projects may also be the perfect opportunity to put the focus on existing building maintenance, modernization, and retrofit. Summer scheduled roofing, high efficiency lighting, HVAC, and process improvements may encounter some delays due to the widespread supply chain issues, but for the most part, the impact to 2021 capex plans should be manageable, if projects are launched before fall.

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Long Term Insights: Prices and Inventory Will Likely Stabilize by This Time Next Year

Pouring molten iron

The long-term outlook for the steel industry anticipates the supply chain returning to pre-pandemic stability in mid-2022 – but it could, possibly, be earlier. Lumber prices – which soared to unprecedented heights this past May – are now in a steep decline just one month later, as market forces turn dollars away from construction and into travel and entertainment. Diverting dollars away from steel projects could, theoretically, create a similar scenario.

Either way, one thing is certain, projects that are locked in today will be first in line when the steel backlogs are cleared and inventory becomes available. Further, experienced builders know this and are securing their PEMB and sub-contractor partners now. They understand that new construction not in the pipeline before the end of fall 2021 may not see ground breaking until 2023 or even later.

FSE recommends that anyone embarking on a division 13 construction project – even projects that are on the board for 2023 and 2024 – plan and schedule now in order to beat the implementation backlog caused by the current steel shortages.

FSE – PEMB Steel Erectors Ready to Help You Meet Your Project Implementation Goals Through Strategic Planning for Uncertain Times.
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