Diesel Price Hikes Were the War's First Wave. The Next Wave Will Be Taller and Much Wider

By Craig Webb

It's not certain that we'll see in coming weeks a cease-fire and ultimately the end of the war in Iran. But you can be certain that the list prices for a wide range of building materials are going to go up this spring, particularly when the product involved is made at least partly from petroleum.

We don't know how many price hikes will stick, and we don't know how long it will take oil prices to go down once peace finally returns and the Strait of Hormuz reopens. One thing dealers can expect, however, is that higher prices will make their revenues look better than they had forecast back in pre-war days. On the other hand, the cost of goods sold also will rise. Dealers will need to be resolute about maintaining their profit margins amid such volatility.

Which products will cost more? Announcements and forecasts are coming out regularly:

• Roofing manufacturers Tamko, Owens Corning, Atlas Roofing, CertainTeed, WeatherBond, and GAF all announced price increases of 4% to 8%, according to notices from Camco Roofing Supplies, J&L Building Materials, and Talbert Building Supply.

• Aluminum products at Berger are going up 15% and copper items will rise 12%, J&L reported.

• Pittsburgh Paints is putting a 10% to 18% price increase on solvents, an 8% surcharge on paints, stains, and coatings, and a 4% increase on sundries, all effective May 1. Sherwin-Williams' announcement said paint products would go up 9% and thinners, reducers, and bulk solvent products by 18%.

• James Hardie's backer board went up in price April 1, Talbert reported. It also said CertainTeed has given notice its gypsum products will increase 20% to 30% on May 4.

• Economist Matt Saunders estimates that for every 10% increase in the inflation-adjusted price of oil, the wholesale price for plastic and resin-based PVC products will rise 1.7%. For steel mill products, a 10% rise in oil pushes up the wholesale costs of those goods by 0.8% to 0.9%.

• Zonda's Todd Tomalak says that, in general, building product manufacturers are attempting to pass along 6% to 10% price increases over the next 60 days. He believes this could spur even more pro contractors to increase their buying online, where they can get better views of prices and trends.

Even non-petroleum products are being hit. Talbert said lumber prices are going up because it's costing more to deliver the goods by truck, plus trucks are getting harder to find. Diesel fuel prices rose to $5.64 nationwide as of April 6, a 55% increase year-over-year. Those fuel costs combined with trucking shortages are "creating pressure that could delay project timelines if not proactively managed," Talbert warned. Dealers that haven't added delivery charges during past fuel price run-ups may start doing so now: Tully Building Supply just did.

Saunders, a former economist at John Burns Research and Consulting who now runs his own Saunders Economic Advisory firm, said we're at the start of seeing the oil shock spread through the broader housing market. "Higher energy prices can feed into inflation expectations, which can keep interest rates, including mortgages, higher for longer," he told Webb Analytics. "This impacts housing affordability, which is already strained."

Paying more at the pump will reduce consumers' disposable income and make them leery of buying a home, Saunders predicted. Indeed, builders say they're already seeing potential buyers use gas prices as a reason for delaying purchase plans. And in farm country, an expected shortage of fertilizer--a big product from Arabian Gulf nations---could affect crop yields this year and thus make farmers less eager to buy new equipment.