Greetings and welcome to Insulate SB's quarterly email newsletter. As we're closing out the 3rd quarter of 2021, we wanted to update our customers, builders, architects, construction professionals and homeowners on the latest insulation industry updates.
Much like last quarters newsletter, I will touch on material shortages and material price increases. I know, same story that's circling for all industry's across the country but I wanted to share some new information regarding insulation and the expectations we should all have. Lets face it, neither are going away anytime soon. I have been told from a few of our trust worthy sources that best case scenario supply will not improve until March or April of 2022. If the global pandemic worsen it may not be until the end of 2022. If you recall, last quarters newsletter I mentioned that we were eyeing September of this year for stabilization. So our crystal ball has been officially thrown out the window and there is not really a way to predict when material increases and product availability will stabilize.
Lets briefly dive into a few other aspects that are affecting the Spray Foam industry directly. Pre- pandemic raw materials that are shipped from China to Texas had a lead time of 4-6 weeks. Now its closer to 3-4 months. Flame retardants that are used in open and closed cell foams are on allocation with open cell using the majority of it versus closed cell. 40 Foot shipping containers that used to cost $2,500 shipped from China to Los Angeles pre-pandemic are now $20,000+ to ship. As you may know, China supplies most of the steel that is used in the US. 55 gallon steel drums that are used to ship and store spray foam insulation have doubled in cost from a year ago. Adding to the cost, wood pallets that hold 4 steel drums per pallet have gone up 300% in cost. So if we take everything that I mentioned above and throw it all into the hopper, were anticipating at least another material price increase by year end on spray foam and availability still a weekly challenge.
I wanted to give you some background on what we are doing to keep spray foam in our warehouse. In years past we would purchase material from one, maybe two suppliers. This year we have purchased material from 4 separate suppliers and have sprayed 5 different brands of foam. Each week I am on the phone with suppliers discussing what products they have in stock or estimated ship dates. This has been an effective way to stay ahead of the curve and to keep spraying your projects. This is the new norm and our priority is to make sure we have material that will not cause time restraints for your projects and clients. It is still a challenge but based on our strong relationships with suppliers, we have been able to maintain enough foam that has not slowed down any project. We will continue this method until spray foam materials stabilize.
Now lets move into fiberglass insulation as we are facing similar challenges. I really focused this quarter on drilling down on why there are fiberglass material shortages. Speaking with our top fiberglass supplier, who typically receives 12 -15 truckloads a month is receiving 40-50% of all loads that are ordered. Manufactures are not able to build up surplus. The products that the plants are creating are being loaded right into trucks and sent out. Even if there is a purchase order in the system, there is no guarantee the material will arrive. Down to our level we are placing truck load orders and not even getting a confirmation on a delivery date. We have shifted our ordering process, much like spray foam and are on the phone weekly tracking down what each supplier has in stock that we can get our hands on. Some weeks are better than others. We are seeing challenges with R-30 and R-13 batt insulation. As with spray foam, we have been able to stay on top of it and have been able to service our clients and projects.
So you're thinking to yourself, why is there fiberglass shortages, this product has been around forever? As the pandemic hit, just about all of the fiberglass manufactures figured there would be a slow down and at that point they shut down their plants to perform upgrades to their equipment. Then when business levels rapidly picked up, their equipment was down and with less labor availability the perfect material shortage storm hit. Another factor to account for is as new codes and energy reports (Title 24) are coming out, R-Values are higher across the county. Which means more material, thicker material, higher R-Value material needs to be created. This is a big challenge on going for fiberglass suppliers. Knauf Insulation just announced they are building a new plant in Texas. However it will not be in production until the end of 2023. So there isn't much relief in the near future.
Rockwool is still severely challenged with a new time frame of 8 months out. I have been told to expect a major price increase in the early part of 2022 on Rockwool. Bonded Logic who creates and supplies Denim cotton batts have shut their doors and moved their business to helping in the transportation of the Covid-19 vaccine. Not a commonly used product (cotton batts) but still noteworthy to share.
In closing, material shortages and material increases are still a moving target. I encourage everyone that is reading this to protect themselves via contracts and communication with your team and clients as taking on the cost increase burden can be cumbersome. Please reach out to us if you have a cost or material question prior to bidding your project. We will typically receive a material increase letter 30 days prior to the increase. Don't hesitate to email or reach out to me if you would like to go into further detail. Please understand we are doing our best to stay on top of the shortages and price increases. We have great relationships with our suppliers and are in contact with them weekly if not daily and we will come up with a solution if material becomes unavailable for your project.
Greetings and welcome to Insulate SB's quarterly email newsletter. As
we're moving through the 2nd quarter of 2021 (quickly, right?) we thought this would be a good time to reach out to our customers, builders, architects, construction professional and homeowners.
Today's topic I will touch on material shortages and material price increases. Material increases have always been a part of the construction business but at the magnitude we have seen this year its over whelming. We all know how much lumber prices, plumbing materials, doors and windows to name a few prices have gone up. I recall as I was getting into the trades doing labor work for my best friend, we would take the excess 2x4's and burn them in our campfire. Now we squirrel them away like gold coins.
Getting back on track, lets first touch on material shortages. Most of you have already experienced this or have had conversions with one of our team members regarding shortages. The biggest impact the insulation industry has seen is Rockwool and Spray Foam Insulation. We have been anticipating material shortages from early October of 2020. Everything seemed to be fine, and we were not seeing any setbacks until around March of 2021. At that time, we were told Rockwool was 60 days out, then it was moved to 80 days to as of April 2021 it was moved to 150+ days. Fiberglass insulation truckloads were pushed out from 2 weeks to 6 weeks. On top of the above, Spray Foam insulation moved from about a week out to 6-8 weeks. These are all estimated times and as I'm writing this, we still have not been able to receive Rockwool. We have had to get creative with other products, vendors and applications. The biggest challenge for us and for you're is the spray foam shortage. I'm sure your asking yourself with all of the economist that work for the material manufactures, computer technology and forecasting how can we run out of material.
Here are a few bullet points related to Spray Foam.
- Raw material availability mostly related to "Polyols." The cold snap in Texas and a Fire at a chemical processing plant that creates propylene oxide (PO), which produces polyol shut down production for a few weeks.
- There is a major shortage for global shipping containers. Yes, you read that correctly, the big metal boxes that are stuffed with various items and ship across the county via boat are almost non-existent. Three Chinese state-run companies produce 96% of the worlds cargo containers and production has not been ramped up. Imported raw chemicals need a seat or various seats in these containers and without the containers the materials will not arrive on time.
- Container shipping cost have exploded from $1,600 - $3k a year ago to now $12k to $16k. You guessed it, that's a 500 to 1000% increase in shipping cost.We are hoping the material shortages will stabilize by September but are not planning for stabilization until early 2022. We expect rolling supply shortages for both open and closed cell spray foam. Both products use similar raw materials but the ones that they both use, open cell uses 3x as much. Closed cell foam is being produced more rapidly vs open cell. I see that changing in the near future and there will be a big push for Open cell production.
Before I wrap this up lets briefly touch on material increases. On any given year we can expect two to three fiberglass insulation price increases ranging from 10-12%. This year at the mid-way point we have received 3 increases ranging from 8-12% depending on the R-Value. Although we cannot receive Rockwool a price increase went out for July 1st, 2021. in the past 8 months, closed cell foam has increased about 20% and open cell has increased 60%. As you know prices are still sky rocketing, every product that we use from insulation to trash bags to the paper that we print our work orders out for our installers. With fuel prices going up, suppliers are getting creative and adding fuel cost surcharges now instead of a material increase. We are seeing charges of 10%+ on our orders with the idea that they can lower the fuel charges at any point to make use think the material price is going down. But everything is mixed together to leave us to sort it out with you. Please note if you need backup for your customers, I have all manufacture/supplier material price increases letters that I can share with you.
Well if your still with me, that was a lot to share but all very important. And to think this was the short version. I encourage you to email or reach out to me if you would like to go into further detail. Please understand we are doing our best to stay on top of the shortages and price increases. We have great relationships with our suppliers and are in contact with them weekly if not daily and we will come up with a solution if material becomes unavailable for your project.
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