Construction Supply Chain Shortages Continue

Supply chain issues have been prevalent since the start of the pandemic, including greatly impacting the construction industry. As the pandemic began to recede and the world returned to some sense of normalcy, Russia’s invasion of Ukraine has emerged to impact construction through both lack of access to materials and rising costs.

“Supply shortages, worsened by surging demand, have led to the largest annual spike of input prices to construction since 1987, when data collection began,” reports Joe Bousquin for Supply Chain Dive.

Anyone needing gas has already seen a spike in the cost at the pumps. In addition to rising fuel prices, resources like aluminum and copper that are largely produced in Russia have seen ballooning costs. That means that anything made with these base materials will also go up in price.

Bousquin shared that comparing January 2022 to January 2021:

•  Government building construction costs are up 13.2%
•  Highway and street construction costs are up 20%
•  Steel mill products are up 113%
•  Plastic construction products are up 35%.

Inflation is only expected to worsen with the war now nearing the four-week mark.

As a result, many in the industry are wondering how this will impact President Biden’s Infrastructure Investment and Jobs Act (IIJA). Bousquin speculates that this may mean some states choose smaller projects that can be completed more quickly, with hope that inflation will decrease over time.

“However, some observers point out even if IIJA funding won't go as far as initially predicted, it will be spread out over five years,” reports Bousquin That means if supply chains don't recover before 2023, as many forecast, the money will continue to flow for years once more materials become available.”

Sanctions imposed against Russia, along with an increase in pandemic-related shutdowns in China have added additional stress to the supply chain, shares The Harvard Review (THR).

“[M]any companies have been building components and finished goods in China and using the Russian railway to move these items to Eastern and Western Europe,” report David Simchi-Levi and Pierre Haren for THR.

Restrictions on the use of Russian transportation or air space to transport goods may lead to increased shipping costs and time required to get the goods to where they need to be.

The supply chain issues exacerbated by the war are affecting products both large and small.

Chip shortages have already been a massive problem around the world as they are used in everything from cell phones to construction robots. According to THR, Ukraine produces 50% of the world’s neon gas, which is a pivotal component to the process for creating semiconductor chips.

Simchi-Levi and Haren emphasize having infrastructure investments in local regions may help prevent these issues from occurring in the future, but those efforts would take time, money, and investment from state and world governments.

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