Glass suppliers hit the B.C. construction sector with a 40 per cent increase in the price of glass this week, adding to what many builders say are unsustainable cost increases that could lead to a wave of insolvencies.
Guardian Glass gave notice to customers on June 14 that it was raising the price of clear glass 40 per cent effective June 20. Tinted glass will increase 25 per cent.
Other suppliers quickly followed suit.
Guardian declined comment on the increase, which contractors say is impossible to absorb. Combined with cost increases for other materials, it puts the entire production chain at risk, said Craig Enns, vice-president and area manager with EllisDon Corp. in Vancouver.
“The scale of the increases now is such that no matter how good or honourable a trade you are, you can’t absorb a 20 per cent glass increase overnight and still honour your price. Those margins just don’t exist,” Enns said during a June 16 panel discussion regarding construction costs hosted by commercial real estate association NAIOP.
Glass isn’t the only cost that’s increasing. Statistics Canada’s Industrial Product Price Index reports that lumber costs remain 87 per cent higher than in January 2020, while the prices for fabricated metal products and other construction materials have increased 43 per cent.
Drywall is up 55 per cent versus pre-pandemic levels, NAIOP was told.
Delivery timelines for almost all materials have doubled since the start of the pandemic, adding to cost pressures – if they even arrive.
Enns related how a supplier diverted reinforcing steel for one project mid-Pacific and told the subtrade a new, higher price would be available when the new shipment was en route. The work was being done on a fixed-price basis and was 50 per cent complete by cost.
“He’s now facing, at these cost increases, insolvency, to be frank, to honour his low price,” said Enns.
While the number of contractors in the province is 11 per cent above the five-year average at 26,262, Enns expects the number to drop as soaring costs overtake locked-in project costs.
“We see insolvencies on the verge already,” he said.
Statistics compiled by the federal Office of the Superintendent of Bankruptcy show insolvencies among construction companies nationwide have increased dramatically in recent months. The first quarter saw insolvencies rise 20 per cent to 118. An additional 45 insolvencies in April pushed the total in the latest 12 months to 416, a 42 per cent increase from a year ago.
“There needs to be an understanding that contractors can’t just be a good guy and make it work,” said Bryan Reid, president of Kindred Construction Ltd. in Vancouver.
Kindred is working hard to stay ahead of cost increases and supply chain delays, building extra time into contracts and keeping clients updated as issues arise, but that isn’t always enough.
“I’m getting really good at apologizing,” he quipped. “If there’s a level of relationship with the client group, that conversation is easy to have.”