2021 is not an ordinary year for the building materials industry. It’s among the companies likely to face challenges due to the pandemic and various restrictions. Here are the top 5 challenges in the sector in 2021.
COVID 19 will Cause Limitation in the Supply Chain
COVID 19 has dramatically affected the building materials industries. 30 percent of building materials, stones, and glasses come from China and Italy. Statistics show that these countries are among those with high cases of the Coronavirus. As a result, the governments have closed down industries to prevent the spread of the virus, including building material industries, thus causing a decrease in the supply chain.
Besides, countries have restricted the importation of products from these countries. Many countries feared that products from China and Italy would spread the virus in their countries. Therefore, they banned people and cargo movement from these countries in the first quarter of COVID 19.
As a result, China and Italy stopped producing exportation materials since there was no market to sell their products. The industry has now exhausted all the materials produced pre-COVID 19. The industry will continue to experience a shortage in most of 2021.
Environmental Laws in Restrictions in the Industry
The current laws to curb climate change are another challenge in building materials industries. The effect of climate change, including diseases, drought, and famine, has caused world leaders to come up with ways to improve the environment. The laws will only increase more, especially with the pandemic.
The laws will mostly affect cement production. It’s the largest carbon footprint in the building material industry as it emits 8% of the world’s carbon dioxide. The European Union plans to end the emission of these gases by 2030. Almost all industries in the union have agreed to adhere to the target. High fuel requirement in the production of cement causes the emission.
The cement industry will experience restrictions and pressure to reduce the emission. The underway environmental laws target the reduction of poisonous gases like carbon monoxide. The regulation will be stricter in 2021 due to the expected increase of carbon dioxide as industries engage in more production to cover the time lost during the pandemic.
Decreased Home Buying
Demand for homes in many parts, including the USA, remains flat. The housing cycle for the country will also increase, thus reducing the development of new homes. The demand for materials for each house will decrease, and the purchase of premium products.
The pandemic is the center of the low demand for building materials. More than 484000 have died from the COVID, leaving their houses for purchase. Auctioning of many homes as owners fail to pay their mortgages due to demanding economic conditions is increasing.
Thus, the demand for new homes has reduced, which has decreased the need for building materials as people can buy already vacant houses. Besides, people do not have money to buy new homes due to challenging economic conditions.
Tariffs
The various forms of tariffs in industries may affect the building materials industries. In the past few years, companies found a way of adapting to taxes, such as looking for unrestricted suppliers. However, increased restrictions in 2020 will continue to affect the industry.
2021 will start to experience the effect of tariff implementations. The world has seen a wave of trade restrictions as countries break from trade organizations. For example, the British exit from the European Union will significantly affect how countries trade. The hostile trade relationship between China and the USA during president Trump’s reign will continue to affect the building material industry since most of these materials come from China.
Slow Acquisition in the Industry
The number of investors walking away from acquisitions in the industry continues to increase. Investors are unsure about their involvement in the building materials industry as the sector is hit hard by the pandemic. Many buyers have started to get their balance sheets from the industry to escape the current uncertainties.
These are the top challenges facing the building materials industry. If you plan to invest in the industry, it’s essential to understand what to expect and how to deal with the current situation.