Special Report: Material Availability and Escalating Prices Likely to Plague Industry Through 2005

The following information was compiled by the National Roofing Contractors Association (NRCA).  Chamberlin is providing this report as a special service to inform our friends and customers of anticipated roofing material shortages and price changes.  Please consider these circumstances when preparing budgets and timing for new construction or remedial roofing projects.

 

A combination of raw-material shortages and unusually sever weather has put roofing industry suppliers and contractors in a particularly precarious position with regard to availability and pricing of roofing materials.  The availability of some materials is a growing concern, and prices of components used in the manufacturing of roofing materials are likely to continue to escalate.  The problem is attributed to a number of factors:

 

  • Worldwide demand for construction materials is at a record high with no signs of slowing down. China, for example, will consume 50 percent of the world’s production of cement this year and one-third of the world’s steel.  India is the second-largest consumer of cement.  Both countries are expected to have robust economies next year.

 

  • Oil prices are at record levels, and many construction materials – and virtually all roofing materials – are made of derivatives of crude oil.  The supply of oil also has been affected by hurricanes in the Gulf of Mexico; the region accounts for 25 percent of U.S. oil production.  In addition, the supply of asphalt has been tenuous for more than a year owing to political instability in Venezuela.  And recently, oil production has been disputed in Nigeria, the largest crude oil producer in Africa.

 

  • The hurricanes that have hit Florida and Alabama have spiked demand for all construction materials, including roofing products and, of course, plywood and oriented strand board (OSB).

 

MDI Availability: A Special Problem

 

Of particular interest is the current shortage of diphenylmethane-diisocyanate (MDI), which is one of the principal ingredients used to manufacture polyisocyanurate roof insulation.  MDI currently is manufactured by four multinational chemical companies and is derived from benzene.  The price of benzene has roughly doubled since January 2004.  The polyiso industry consumes about 360 million pounds of MDI annually, and it represents a significant portion of the cost of making the product.

 

MDI also is used, by the way, in a number of other products used in roofing.  These include OSB, EPDM, and many coatings and adhesives.

 

Worldwide demand for MDI has increased by 18 percent thus far in 2004 – well beyond what industry experts had expected.  Demand is expected to remain strong during 2005, as well as MDI is being produced at near-capacity levels.  One additional MDI manufacturing plant is scheduled to open in 2006 – in China – and another in North America in 2008.  It is, therefore, likely that we will see continued availability issues for at least another two years.

 

 

Recommendations to Our Clients

 

  1. Work closely with a trusted roofing contractor to get the best and most current information about pricing and availability of product, particularly polyisocyanurate insulation (polyiso).      

 

  1. Consider taking material delivery early and work out the details of onsite material storage to ensure material availability and pricing.

 

  1. Consider qualifying your proposal to the owner to reflect market conditions. 

 

 

If you would like more information, contact one of the Chamberlin offices.  We’ll be happy to share any additional knowledge we have of this situation and discuss how we might help avoid any unpleasant surprises for all of us.