Through the Roof

Subcontractors can find themselves in a particularly tough spot as material costs grow in a competitive bidding market. “The industry standard for profitability in the wall and ceiling industry now is only 2 percent, and five or six years ago, profit margins were closer to 10 percent,” says Panek of Minuti-Ogle. “If there is a major price hike between the time you win a bid and go to buy materials for a big project, you can’t absorb it anymore, because your margins aren’t high enough to provide that cushion.”

Most observers expect prices to continue rising throughout the year. Panek says some suppliers have told him costs will continue to rise at above-normal levels through at least summer of 2007. Wood expects certain material price increases—particularly sheetrock, cement, and lumber—to continue “in the high single digits” for the foreseeable future, especially since the full effects of Katrina on the industry are yet to be felt.

“When the reconstruction in the Gulf Coast finally gets into full swing, the consumption of materials and labor and the resulting supply shortages will have a big impact on pricing,” Wood says.