Multiple factors have led to the current concrete shortage
Virtually every industry around the world is coping with severe supply chain delays and shortages, but the concrete shortage is having a particularly serious impact. Several factors are contributing to the issue and building up to a severe shortage of one of the world’s most valuable and critical materials. The ripple effect reaches construction first but impacts everything from public transit to the housing market.
What Is Causing the Concrete Shortage?
The concrete shortage is difficult to trace back to one source. The reality is that no one part of the concrete supply chain is to blame for the current shortage. Numerous factors are at play and it will take a multi-faceted approach to resolve the issue.
The Concrete Supply Chain
It is important to remember that concrete relies on its own supply chain first. Concrete is actually a composite material made of a mixture of cement, rocks, sand, water, and other additives. The sourcing and supply of all of these materials directly affect the global supply of concrete, which in turn affects the availability of construction materials and therefore the price of new projects.
Even after all of the necessary ingredients for concrete are collected, the process of creating the concrete through complex heating, mixing, and chemical processes is intense and time-consuming. Factors like this are difficult to speed up, as well, putting a cap on just how fast new concrete can be produced.
Industry leaders have to make predictions about the level of demand they expect to see each year. This determines the supply requests that concrete manufacturers submit. When COVID-19 hit, most industry experts expected to see something like the financial crisis of 2008, where demand for concrete dropped off drastically due to a sharp decrease in demand for new infrastructure as a result of nationally lower funds.
Leaders in the concrete industry commented on this expectation in recent interviews with CNBC, remarking that this sharp drop in demand was not at all what they actually experienced.
Lack of Workers
The construction industry has been coping with a general labor shortage for several years now, made worse by an aging workforce, many of whom are fast approaching retirement. There has never been a worse time for such a labor shortage to persist, and it is a driving factor in the current concrete shortage. This problem exists at every level of the supply chain, from the sourcing of materials to the actual pouring of concrete on construction sites. There simply aren’t enough workers to meet demand.
Construction fields have been struggling to recruit young people, who have been slowly turning away from skilled trade professions over recent years. This may be due to any number of factors, including the growing perception among Gen-Z that college is an absolute necessity as well as the increasing lack of skilled craft classes available to high school students. Meeting the surging demand for concrete and other construction projects will require the industry to address these concerns and bring more young people into the trade fields.
Pressure on Construction Companies
The concrete shortage is forcing prices on new construction projects sky high as a result of sheer supply and demand disparity. It is also making it more difficult for project owners to actually begin work on their new buildings because the materials needed to make them simply aren’t available. Even when work can begin, budgeting becomes more complicated than usual, which could affect how much project owners are able to pay contractors.
Meanwhile, contractors are struggling to meet demand in addition to getting the materials they need. According to recent surveys, 92% of contractors are struggling to find workers with the skills they need to meet demand. The labor shortage in the construction industry is largely composed of unfilled manual labor and skilled craftsman positions which make up the bulk of contractor roles.
The supply shortage in the industry includes virtually all vital materials, from lumber to steel in addition to concrete. Concrete is a particularly pressing concern, though, because it is often necessary for laying the foundation of buildings. So, a delay in getting concrete could delay an entire project for weeks or months.
This is an issue even for projects that don’t use concrete for a primary wall or structural purpose. Houses, for example, don’t typically use concrete for most parts of the actual building, with the notable exception of basements. Even in climates where basements aren’t common, concrete is needed for laying foundations, driveways, sidewalks, and roads. Laying all that concrete is a complex and delicate process, as well, requiring trained workers to get the job done properly.
Between a continuing lack of workers and this universal need for concrete, construction companies are quite literally caught between a rock and a hard place.
Sources of Construction Demand
Interestingly, from a demand standpoint, there has never been a better time to be in construction in recent decades. Despite the challenges the construction industry is facing, studies have revealed incredible growth in the industry as a result of demand increases and economic recovery from the COVID-19 pandemic. Demand for infrastructure is surging, between a combination of ambitious government programs, commercial projects, and the booming housing market.
The U.S. Infrastructure Bill
The 2021 U.S. Infrastructure Bill passed by a bipartisan Congress contains a budget of over $1 trillion. The funding will be used for a wealth of valuable projects over the next five years, including everything from new rail systems to bridges and electric vehicles.
A vast majority of the initiatives of the Infrastructure Bill will require mass amounts of concrete to complete. While the Bill is being heralded for the economic growth and job creation it is expected to generate, a solution will first need to be found for the concrete shortage.
Britain’s HS2 Project
The United Kingdom is pursuing an ambitious public transit initiative, called High Speed 2 or simply “HS2.” The project is an innovative high-speed rail system and the first leg of the railway is already under construction, connecting London and Birmingham. However, HS2 is demanding such a high quantity of the U.K.’s concrete supply that smaller projects and construction companies are struggling to make any progress due to the unavailability of materials.
HS2, while a valuable public transit development, is essentially destabilizing the U.K. concrete market when the industry is already struggling to meet demand.
A Heated Housing Market
Many have blamed COVID-19 for the highly competitive housing market dominating 2021 and likely 2022, as well. In reality, however, the concrete shortage is largely responsible. New houses simply can’t be built fast enough or cheap enough to meet demand. New innovations, such as 3D printed buildings and houses, are even being pursued in attempts to find a solution.
While some real estate experts expect the market to cool down going into 2022, things are still rough for new homebuyers.
Concrete’s Ripple Effect
Concrete is a critical part of the entirety of human civilization. Even as far back as ancient Rome, people have been using concrete to construct the places we call home. Meeting the current surge in demand won’t be easy, but it may turn out to be beneficial in the long run. Hundreds of thousands of new, high-paying jobs will be created. New concrete facilities will need to be built to help speed up production, creating more new jobs and more modern infrastructure. Eventually, the concrete industry may one day catch up to demand, fueling the cities, homes, and transportation of tomorrow.
Emily Newton is the editor-in-chief of Revolutionized, a magazine exploring how innovations change our world.
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