Relief in Supply Chain Woes

Nov 26

Written By Pinnacle Real Estate Investment & Development

Since the COVID-19 pandemic took hold building materials have been in short supply and have seen double-digit price spikes, driving up project and rebuilding costs and affecting companies ranging from contractors to real estate developers.

With Asia output coming back and some of the bottlenecks clearing up, there seems to be a change to more normal operations in this coming year. Ocean freight rates have retreated from record levels and if all of these variables continue to improve this could alleviate the upward pressure on inflation.

The good news is that the worst seems to be over for global supply chains. We are starting to see a shift in the seaports, shipping companies and transportation industry. There as been a significant level of pre-orders which that should help ease shortages of goods. In addition, with the passing of the infrastructure bill, new and improved facilities/ports and container ships are going to be built to add to existing capacity in the very near future.

The industry has seen the “perfect storm” of manufacturing and production setbacks, logistical bottlenecks, labor shortages which have led to cost overruns, delays, and frustrations for the industry.

Increased prices for lumber and especially steel have continued to drive up input costs. In addition to construction materials, steel is also used for appliances, which have been in short supply for large residential projects.

The shortages have led to some construction companies moving supplies to different sites to avoid work delays and some to hoard materials to avoid shortages, sources say.

“COVID-19 caused people to change their behavior and that translates to how they operate in the marketplace, so we see it as an economic disruption with people are doing things differently and coming up with optional means of transportation; Some bigger retailers are using their own chartered planes and smaller ships to get merchandise to help move cargo as quickly as possible, and by implementing these optional measures is help to eliminate some of the grid lock that has occurred in some of the ports. “There may still be swings, but overall, I think the worst is over,” Esben Poulsson, who chairs the International Chamber of Shipping, told CNBC’s on Tuesday.

The cargo ships that have been idled in the waterways are now beginning to move into the ports. It has been reported that the number of ships waiting to unload in Los Angeles and Long Beach CA on November 19th dropped from 86 to 71 in a three day period.

This is encouraging news and has given optimism to the many contractors and real estate developers who are trying to keep up with the delivery of units and demand for future contracts.