How Coronavirus is Impacting the Construction Industry

Category: Construction | By Holly Hughes-Barnes | 3 minute read | Updated Mar 11, 2020
How Coronavirus is Impacting the Construction Industry

Last updated March 25, 2020.

The Coronavirus was first reported in China on December 31, 2019. 

And the coronavirus is slowly spreading.

To date, there are more than 438,000 confirmed cases in 179 countries, and almost 20,000 deaths.

In response to this health crisis, world leaders and health organizations are making efforts to contain the virus and stop it from becoming a global pandemic. 

Much of China is still enforcing strict quarantines, although the virus has slowed there. And Chinese factories have ceased or greatly reduced production outputs. 

Across the globe, tight travel and shipping restrictions are being put in place. But these tight controls which are designed to slow the spread of the Coronavirus are also slowing down economies. And industries worldwide are feeling the negative repercussions.

Here is how the ripple effects of this health crisis are beginning to impact the US construction industry:

Regulations to Fight the Spread of Coronavirus Are Causing Logistics Breakdowns

Freight and shipping services to and from affected areas are being suspended as governments around the world are implementing new regulations to limit the transmission of the Coronavirus.

FedEx released this alert on March 2: 

“Due to the coronavirus (COVID-19) outbreak... and measures imposed by governments around the world, there are currently unavoidable service impacts on air and ocean freight shipments shipping into and out of China… ...Countries outside of China have released and continue to develop rules and regulations in an effort to help control the impact and further transmission of the virus. Those rules and regulations are impacting our service...”

And as freight services are being suspended or tightly regulated, shipping ports are slowing to a halt.

US ports from coast to coast are reducing operating hours. And port authorities are expecting a drop of 20 - 40% or more in cargo volume between now and April 2020. 

Once busy ports are now cramped with idle ships full of containers that aren’t going anywhere. Some are empty containers that can’t be shipped back out to affected areas. Others are quarantined containers full of goods that can’t be delivered.

According to Alpaliner, a shipping data service, more cargo ships are idle now than during the global financial crisis of 2008.

Stalled Logistics Operations are Causing a Shortage of Some Building Supplies

The disruption in logistics operations is affecting the global supply chain, and the US construction industry is starting to see a shortage of some building materials because of it. 

About 30% of all building materials imported to the US come from China. Imports range from steel, stone, and millwork to plumbing parts, electrical supplies and flooring. 

And many construction pros, from general contractors to modular home builders, now have supplies that are stuck in quarantine at ports across the country. And developers who rely heavily on imports from China are having to think about new ways to source materials. 

But it’s not just standard building materials that are in short supply due to the outbreak of the coronavirus. Some construction crews are also running out of face masks and respirators as the medical community needs an increasing amount and regular consumers are stocking up.  

3M is pledging to increase output, but according to a statement on their website, they expect demand for respirators to outpace supply for the foreseeable future.

Home Depot is currently limiting the amount of respirator masks to 10 per order online and in stores. And Lowe’s is selling limited-supply masks in-store only.

Amidst this respirator shortage, FaceBook and Instagram are banning unscrupulous ads for face masks on their platforms.

“Supplies are short, prices are up, and we’re against people exploiting this public health emergency,” tweeted Adam Mosseri, the head of Instagram.

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Shortage of Supplies Expected to Cause Higher Construction Costs

Even before the threat of the Coronavirus, Jones Lang LaSalle’s US Construction Outlook report for 2020 projected that construction cost inflation would land between 1% and 3%.

But just like the shortage of respirators is causing an unexpected price increase for face masks, other construction supply shortages could drive costs up more than expected.

Copper, aluminum, and casework are already seeing price increases because of interruptions in the supply chain, according to a recent interview from Daniel Pomfret, the vice president of forecasting and analytics at Cummings.

But just how much more construction costs will increase will depend on how long the health crisis lasts. 

Mitigation of the Coronavirus Could Cause Temporary Delays for Construction Projects

A statement on the Centers for Disease Control (CDC) website says this:

“It’s likely that at some point, widespread transmission of COVID-19 in the United States will occur...

Widespread transmission of COVID-19 would translate into large numbers of people needing medical care at the same time. Schools, childcare centers and workplaces may experience more absenteeism.” 

And on March 8, surgeon general, Jerome Adams, appeared on the news show, Face the Nation, to talk about steps for mitigating the virus.

“Containment worked to slow the introduction of the virus and gave people time to prepare,” he said. “[But] now...communities need to look at how we deal with community spread…things such as social distancing, not having large gatherings, pulling down events. Those are conversations that communities need to be having right now.”

That means that as the disease spreads, workers in more heavily affected areas of the US may self-quarantine in order to distance themselves from the virus. And this absenteeism could cause delays in projects. 

And, in a worst-case scenario, like China or Italy, the US government could shut down major construction and infrastructure projects as more aggressive efforts are enacted to stop the disease.

But even with these possibilities looming, there is no need for construction business owners to panic. Instead, they should start creating contingency plans to ensure they are ready for any problems that could arise.

For advice on how to prepare your construction firm for the coronavirus, see this article: How To Prepare Your Business For The Coronavirus Outbreak.

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