“The System Is Broken”: Boots-on-the-Ground Vi

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“We are simply limited to what our suppliers tell us we can have. It really isn’t supposed to work this way!”

By Wolf Richter for WOLF STREET.

For what seems like a long time now, Wolf Street has been discussing the apparently never-ending shortages that US manufacturers, construction companies, retailers, and other businesses have been struggling with. So here are the boots-on-the-ground observations by an Ohio-based manufacturer, with operations in other states, about the global supply-chain chaos. Todd Miller is the president of Isaiah Industries, which manufactures metal roofing shingles for residences and commercial buildings and sells them under several brands, such as Classic Metal Roofing Systems, in North America, Japan, and the Caribbean. He shared his observations with Wolf Street:
By Todd Miller, president of Isaiah Industries:

Over the years, we have seen some situations where metal supply was tight and caused some disruption for us and our customers. However, we’ve never seen anything like we’re experiencing now as it goes beyond just metal supply to also include the specialty coatings we use.

Supply shortages started in 2020 with Covid-related closures at the leading metal mills where we buy steel, aluminum, and copper. Once the consumer demand for virtually everything under the sun started to accelerate wildly in the latter part of 2020, mills were caught with shortages, and significant delays and backlogs developed – a situation that has yet to be rectified.

Generally, consumers are understanding of the price increases. But now delays and shortages threaten our ability to meet consumer needs. We currently are running about a 60-day backlog on orders, the bulk of which we are waiting for raw materials to arrive. Historically, our backlog was a couple of weeks at the most.

Isaiah Industries has been put on allocation from the metal mills. The days of being able to place orders and know that we will receive the metal we need when we need it are long gone. Manufactures now tell us how much they can sell us. And even at that, they are often delayed on shipments.

Along with that, prices accelerated. Those shortages and increasing prices continue today.

While historically allocation scenarios have allowed us to seek out additional vendors or, on rare occasion, offshore metal, the situation now is that no one has extra metal to spare. Occasionally we might find something at a very high premium price, but usually we are simply limited to what our suppliers tell us we can have. It really isn’t supposed to work this way! The system is broken.

The metal shortage is now compounded by an extreme shortage of polyvinylidene fluoride (PVDF), a resin compound that is the “secret sauce” to the highly durable coatings that we and our competitors use. PVDF is known for its fade and chalk-resistant properties that hallmark the long life expectancy of quality metal roof systems.

The PVDF and coatings shortages are only partly Covid-related; they’re largely related to a reduction in Chinese production of these compounds to meet environmental requirements. And Electric Vehicle batteries also use PVDF.

The end result has not only been shortages and allocations on these coatings but price increases. We’re told that the EV folks use PVDF in pretty small quantities, and apparently the sky is the limit in terms of what they will pay for it.

While PVDF allocation levels have been based on prior years’ use, those numbers were lower in recent years due to metal shortages.

The end result is we’re doing our best, and I believe our suppliers are doing their best, but the system has been stretched beyond its limits. If consumer demand for our products remains high, and we expect that it will, I don’t see how we will be able to provide what customers want this year.

At the same time, rapidly spiraling raw material costs are pinching margins. We can’t put through price increases as quickly as we’re seeing them. And that’s not just metals and coatings but also packaging, transportation, and, well, pretty much everything.

Metal, now at about a 15% share of the residential roofing market, will have its continued growth threatened in coming years. Most of these products, by the way, are domestically produced.

An interesting side note to all of this is that 2009, in the midst of the Great recession, was one of our best years ever as a company. The same could really be true this year but we will be held back by the supply-chain issues

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