Dive Brief:

• GMS ordered more wallboard and steel to navigate high demand and longer lead times, even as "pervasive supplier pricing actions" pushed up the cost of the materials, CFO Scott Deakin said on a Q2 earnings call.
• Lead times for steel at times reached up to 12 weeks — five times longer than normal — and pushed the interior building products distributor to increase orders, CEO John Turner said on the call.
• Wallboard availability has improved, although plant maintenance, seasonal fluctuations and other factors continue to pose problems. "That probably won't change," Turner said.

Dive Insight:

Wallboard and steel are among a number of key material shortages that have hamstrung the construction industry this year, pushing up prices and delaying deliveries. While wallboard inventories have improved slightly, Foundation Building Materials expects shortages to continue well into 2022.

Wallboard demand has surged as the construction industry works to build itself out of a backlog of projects. That led Eagle Materials, a national U.S. gypsum wallboard producer, to raise its prices by 33% YoY, said CEO Michael Haack on a Q2 earnings call. The Dallas-based supplier, which owns nearly all its raw materials, isn't finished raising prices.

"I suspect it may raise the question in some people’s minds as to whether we are nearing the peak for this cycle," Haack said. "If our demand outlook is correct, I think, we are not."

GMS, which sells commercial and residential wallboard, suspended ceilings, steel framing and other interior construction products, ordered more materials despite facing supplier price increases each quarter for the past year.

"The reality of our inventory is that as lead times have extended, that's the driver of having to carry more inventory on a unit basis," Turner said. GMS’s lead time for steel has improved, but it’s still "nowhere near where it was back prior to the pandemic or even just in the early stages of the pandemic."

Steel shortages and record prices stemmed from mills' inability to keep up with customer demand, according to Foundation Building Materials. "We don’t foresee a substantial change in this until 2022," spokesperson Kirby Thompson wrote on the company's website.

While inflated wallboard prices have leveled somewhat, GMS expects them to continue to rise in 2022. Wallboard volumes dropped 1.1%, and commercial volumes continue to lag residential as availability remains subject to seasonal fluctuations and other disruptions, Turner said.

"That demand is probably going to be reasonable, and ... you're going to see some situations around the country where lead times are slightly extended for wallboard as well," he said.