Summer is heating up, and so is the construction business. While summer is typically the busiest time of year for paving companies, the summer of 2022 will be unlike any we’ve seen before. Here’s a quick look at the industry this summer and how companies can cope with the challenges and pace.
Unparalleled Demand Across the Industry
The construction industry continues to grow at a great pace. July of 2021 saw the construction industry hit a high of 1.57 trillion dollars, which was 12% higher than July 2019’s pre-pandemic levels. This summer promises strong demand as well. The passage of the infrastructure bill in November 2021 will release at least $350 billion in funds for highways and bridges. Those funds have begun to be distributed. By mid-May $110 billion had been released to states. As states move into position to hire companies for these projects, the construction industry will reap the benefits. Beginning this summer, pavement companies could see increased demand from cities for projects related to renewing roads and bridges, as well as making them safer.
The Labor Shortage Continues
While the outlook for construction and pavement companies is vibrant, the industry is still facing labor shortages, especially for skilled workers. While not a new problem, it’s challenging to find enough laborers to fulfill roles for demanding summer schedules. According to the U.S. Chamber of Commerce, 91% of contractors reported difficulty filling jobs in 2021, and 45% have turned down jobs because they don’t have enough labor to complete them. While this is a serious problem for the long-term health of the industry, this summer contractors can offer the best wages possible to attract employees, with the promise of steady work. When speaking with clients, lay out realistic timetables for job completions and help them understand the labor shortage affecting the industry.
The Effects of the Materials Shortage
The materials shortage that has plagued the industry throughout 2021 and the first half of 2022 continues. A whopping 95% of contractors reported a shortage of at least one material in the past year. The pandemic bottleneck continues to wreak havoc with suppliers, coupled with an international crisis of the ongoing war in Ukraine. Both Russia and Ukraine manufacture raw materials for many industries, including construction. The war has also disrupted global shipping as the costs of oil and gas rise, making it more expensive to transport materials. As Russia squeezes Ukraine’s ports and shipping lanes, it delays and cuts off container ships that supply the international market.
What Can Pavement Companies Do This Summer?
All of this creates an unpredictable supply chain within the construction industry. General inflation hit 8.5% in March. Costs within the construction industry have risen, some as much as 25%, and it’s difficult to say what prices will look like even a few months in the future. As companies make bids and take jobs this summer, it’s wise to consider adopting measures to mitigate shortages and price increases.
One way is to lock in contracts and purchase materials immediately to complete the job. Stockpiling can create its own problems, though, as companies then must consider ways to store materials. Another measure is using price escalation models in contracts so companies aren’t locked into bids that don’t account for inflation. These aren’t easy solutions, but inflation and the labor and materials shortages won’t be resolved soon, either.
The summer of 2022 is a bit of a paradox for pavement companies. While most will experience a boost in demand that should continue well into 2023, inflation and shortages are complicating the industry. For the short-term, communication with clients is critical to help clients understand cost increases or project delays.
The Pavement Network Buyer’s Alliance values every company within its network, and we’re here to assist in any way this summer and beyond.
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