Tag Archives: Styrofoam

Why Building Prices Won’t Go Down

Why Building Prices Will Not Go Down

Flashing back to 35 years or so ago, I bought my first computer. 

I’ll never forget it– it was an clunky Kaypro with a tiny, orange, monochromatic monitor, and a single floppy disk drive. It had 640 kilobytes of RAM, and no hard disk.

I loved it. With this computer I learned how to program, how to navigate a command-line interface, how to design algorithms, and how to solve constant problems… because it was ridiculously buggy and would break down all too frequently.

It was also painfully slow. Boot-up processes could easily take an hour, from when I flipped power switch on, to a ‘DOS prompt’ appearing.

Sometimes I think my computer was a great metaphor for our global economy. Turning it off is nothing; you flip a switch and power goes off. But starting it back up again takes a long time. And this process isn’t so smooth– sometimes it crashes during bootup.

Last March when this Great Plague was upon us, nearly every industry, in nearly every country, practically shut down.

And many businesses went bust, never to return.

Eighteen months later businesses have largely reopened. But like my old computer, this reboot process has been riddled with critical errors and system failures.

For example, right now there are countless businesses in industries from retail to manufacturing experiencing severe labor shortages. Supply chains everywhere are breaking down, resulting in product shortages and major transportation bottlenecks.

End result of this dumpster fire is prices are soaring. And I wanted to spend some time today dot connecting to help explain some of these important trends.

Let’s go back to last March again when everything shut down. You probably recall dozens of large companies declared bankruptcy, like Nieman Marcus, GNC, JC Penny, etc.

But there were other companies going bust most people have probably never heard of. They were in more mundane, less sexy industries… like corrugated paper and wood pulp.

Yet while their demise was hardly noticed, it turns out they would have a significant impact on our global economy.

Global shipping demand surged last year in ways never seen before. Suddenly, instead of efficient supply chains shipping goods to large marketplaces (like retail and grocery stores), consumers wanted everything delivered to them.

While total shipping volume  was largely unchanged (or even less) than previous years, the number of individual shipments increased dramatically.

In other words, instead of a single large shipment to a store or supermarket, companies were making thousands of tiny shipments to individual consumers.

This meant more trips… and more packaging. More cardboard boxes. More plastic wrap. More plastic containers. More Styrofoam.

And prices for all of these materials has spiked.

Price for polyethylene, for example, used extensively in shipping, has increased from $820 per ton to $1,850 per ton. Polypropylene prices are also up from $1,100 per ton to $1,770 per ton.

It’s a similar trend with cardboard and corrugated paper. And these price increases aren’t simply due to high demand either.

Supply has fallen. Last March when a number of wood pulp producers went out of business, no one noticed and no one cared. But it turned out more than 10% of all North American paper capacity vanished, practically overnight, just before demand started to surge.

And this capacity cannot be simply turned on again with a flip of a switch. It takes a lot of effort to resurrect a bankrupt factory, to re-hire and re-train workers. (We’ll get to worker issues in a moment.)

It’s a similar trend worldwide– foreign factories have closed, and those remaining open are struggling to retain workers and operate under strict COVID protocols. Manufacturing efficiency is way down as a result, so they’re not producing enough supply to keep up with demand.

Then there are actual shipping problems– crazy delays, especially United States’ West Coast, preventing container ships from delivering their cargo.

There are plenty enough ships; in fact, total global capacity in terms of TEUs, or 20-foot Equivalent Units, is slightly higher than pre-pandemic.

But a range of factors, including COVID rules and union regulations, means there’s a shortage of maritime crew to operate vessels. There’s also a shortage of dockworkers, truck drivers, forklift operators, etc. at ports.

This is especially true in California, whose regulatory environment makes port operations extremely difficult and inefficient.

Yet sadly, California’s ports are our busiest and most important country; most sea freight from China is offloaded at either Port of Long Beach or Port of Los Angeles, so bottlenecks there cause a major ripple effect nationwide.

Right now there is a backlog of literally hundreds of thousands of ships waiting to unload their cargo in southern California.

This makes California’s COVID policies especially important as whatever Gavin Newsome decides has a huge impact on our national economy.

Labor is obviously another major issue in this messy economic reboot.

Thanks to a steady digest of mass media Covid hysteria, there are still plenty of people who are terrified to leave their homes and go to work.

Moreover, there are so many people who got used to being home now they only want a job where they can work from home.

This is a major problem for businesses… and why it’s so hard for restaurant companies, fast food joints, retail shops, factories, etc. to find workers. People would rather stay home.

Our government hasn’t exactly been helpful in this department when they were paying outsized unemployment benefits to encourage everyone to stay home. This effect is lingering.

There’s another trend at work here, though.

For several years, politicians have been fighting hard to bring United States’ manufacturing jobs back.

It turns out no one really wanted those jobs to begin with.

Younger people in particular don’t have as much interest in those sorts of traditional jobs; they’d rather be ‘influencers’ and make their money posting posterior selfies and snapshots of their contrived lifestyle.

This was already becoming an issue prior to COVID; large companies– especially those in industries considered unappealing to Gen Z– were complaining how difficult it was to hire, train, and retain young workers. Now it’s borderline impossible.

Retail companies lucky enough to find employees are forced to misallocate those scarce resources to do unproductive tasks, like checking everyone’s ‘papers’ when customers walk through their door.

And then, of course, if a business has been able to navigate all these crazy obstacles, someone is now forcing you to fire any worker who hasn’t been jabbed.

Adding to this is the Federal Reserve’s monetary blowout. They’ve printed trillions of dollars over 18 months to ‘support our economy’. Yet even though our unemployment rate is down to 4.8%, they’re STILL printing at least $120 billion per month in new money.

All this new money has helped fuel giant asset bubbles in stocks, bonds, property, and commodities. Energy prices in particular have risen sharply, and this tends to cause all other prices to rise.

Results in this insanity – inflation. Lots of it.

Problem is most of these trends are not going away anytime soon. The Fed may start to taper its money printing. But they have very little room to raise interest rates meaningfully to combat inflation.

Plus labor issues, government policy, shipping, manufacturing shortages, etc. are going to last for a while.

In fact, you’d think a correct government policy right now would be to create incentives for people to work, to create new businesses, and to invest in new technology automating and cleaning up bottlenecks.

At a minimum you’d think they’d stay away and let capitalism do its job.

After all, free market competition is a great tool to fix any economic woes, especially inefficiencies and resource misallocation.

Yet all these proposed policies are anti-competitive and anti-market. They want to create DISINCENTIVES to form businesses and make investments.

It’s exactly opposite of what they should be doing.

Dear Guru: Why Vapor Barrier?

DEAR POLE BARN GURU: I constructed a pole building with the help of Iowa based Amish group. They put up the main structure including metal roof. Due to city codes, I enclosed the 40x60x12 structure using 1/2 osb, house wrap and then vinyl siding. I want to use paper faced 4x8x4″ Styrofoam sheets on the walls, and roll insulation for the ceiling. My question is, do I use a vapor barrier on the walls after putting in the Styrofoam or none at all? And for the ceiling I would assume I would attach a vapor barrier to the bottom side of the trusses and lay the R-25 unfaced insulation on top of that. I have ridge vent and soffit vents. Thanks for your help! Curt in Center Point, IA DEAR CURT: For a properly performing system, your building should have a vapor barrier on the inside of all walls. The paper facing on the Styrofoam™ panels should be a vapor barrier. In order to perform properly, you need to make sure all edges and joints are tightly sealed, to prevent moisture from entering the wall cavity.

A vapor barrier should NOT be placed across the bottom of the roof trusses. If your building has steel roofing, I am hoping some sort of thermal break (like a reflective radiant barrier or similar) has been installed between the roof purlins and the roof steel, otherwise you are in for a plethora of problems. Warm moist air from your building needs to be able to pass through the ceiling and into the non-conditioned dead attic space, where it can be properly vented out of the ridge vent. You also should consider a greater R value in the attic. According to the North American Insulation Manufacturers Association https://www.naima.org/insulation-knowledge-base/residential-home-insulation/how-much-insulation-should-be-installed.html a minimum of R-38 should be installed in Iowa.

Mike the Pole Barn Guru

Dear Pole Barn Guru: We had hail damage to a post frame office building last Summer. Several months prior to the storm we had the side walls spray foam insulated (closed cell) and then framed and dry-walled. We have finally settled up with the insurance company and are ready to “re-skin” the building. The spray foam insulation was a significant expense and if we take off the metal siding the insulation will come off too. Here is my question: Can we simply install another layer of 29 gauge metal siding over the existing siding? Or can we fur out and install a different type of siding? Your input would be greatly appreciated!   KEN in Ft. Collins, CO

DEAR KEN: Although hail damage to steel siding and roofing is unusual, you have now found the downside to spray foam insulation applied to the inside face of it. If you place furring strips on the outside of the existing siding, you are most likely going to end up with the siding on the eave sides extending past the typical steel roof overhangs provided with most pole buildings. Plus, anything other than pre-painted steel siding is likely to come along with a lifetime of having to maintain it. In all probability, your best solution may very well be to install siding of the exact same profile over the existing steel. Screws will need to removed from each panel as you work your way down the wall, and replaced with screws of a larger diameter, as well as longer – in order to properly hold both layers of siding in place. With some patience, the results should turn out satisfactory

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