Over the past 2 years, the entire world has had to adapt to widespread supply chain disruptions across hundreds of industries as a result of strains from the COVID-19 pandemic. The HVAC industry is no exception to these supply chain issues, and along with the ever-increasing demand for these systems, the material costs are also rising.
How Supply Chains Became Disrupted
When businesses across almost every industry closed completely at the beginning of the pandemic, the title “essential” was awarded to those who worked in first responder roles, the medical and health field, critical infrastructure workers, and civil servants. Retailers, manufacturers, and wholesalers had to suddenly halt operations for up to months on end, during which all existing product remained untouched. This halted supply chains temporarily and caused a buildup of products in nearly every market. However, as the market began opening again, many industries rushed to make up for lost time by selling as much existing product as possible where able to – considering many industries had to write old product off as a loss for being expired or no longer desired by consumers. This resulted in an increase in sales before the manufacturing industry recovered.
Once businesses had been open for some time and had successfully completed their first sales seasons following the COVID closures, the disparities between supply and demand became glaringly obvious: there was not enough supply to support the demands of the consumer market. This has resulted in the material costs of items rising to help manage market demands.
HVAC Supply Chain Issues
In New Mexico where air conditioning and heating are necessary for surviving extreme temperature fluctuations, HVAC technicians and related industry workers were deemed essential. Due to many buildings and facilities being closed, there was a decrease in systems to service and many HVAC jobs were of the residential scale. The demand for residential HVAC service skyrocketed as a result of people staying home for extended periods of time where they realized their system was not up to par and needed service and/or upgrades, which kept the HVAC industry from taking a hit when it came to work.
Then, when commercial facilities were able to reopen, suddenly service for commercial HVAC systems that had been sitting vacant for extended periods of time became urgent. This resulted in a sudden increase in demand for commercial HVAC services and equipment, once again without an increase in manufacturing operations. HVAC material costs increased 40% since 2019 and will only continue to increase in the coming years as the demand for heating and air conditioning grows.
How HVAC Material Costs are Affected
Although HVAC field workers did not see a reduction in service demand, the factories that manufacture and create all the materials needed took a hit when it came to operations. These supply chain issues caused the availability of materials to decrease, resulting in a supply/demand gap – and this gap has only been widened as time goes on.
At the end of 2021, The Associated General Contractors of America reported that the price for materials soared in November, and Ken Simonson – the chief economist of the association – noted that “prices for nearly every type of construction material are rising at runaway rates.” Material costs are influenced by the overall supply chain process including:
- Manufacturer pricing
- Shipping costs
- Labor costs – from ordering to installation and everything in between
- Availability
- Demand
When the demand for HVAC services skyrocketed, the material costs had no choice but to also increase. Under COVID restrictions, manufacturers are having to pay more to source materials for production – and for production execution in general – due to the varying rules on social distancing and sanitization requirements, and availability of resources. At the same time, the demand for manufacturing labor is not being sustained, as the turnover rate for jobs also reached an all-time high in November. As a result, manufacturers must be able to offer competitive employment terms – particularly competitive wages – if they hope to maintain a stable workforce to keep up with increasing demands. So right away the increased cost of obtaining materials in general and increased labor costs must now be offset by raising material costs.
Additionally, the costs associated with shipping have increased exponentially recently. The pandemic caused an increase in shipping traffic, and along with that came increased pricing and slower transport times. When it comes to the HVAC industry, this proves difficult especially with larger components manufactured overseas. At the same time as parts are becoming more expensive to ship, they are also taking longer to complete the journey due to delays. This means that while HVAC providers will have to offer materials at a higher cost with slower lead times, which can be hard to manage when it comes to the heating and cooling industry – especially in extreme weather episodes.
The COVID-19 pandemic lockdowns placed significant strain on the global supply chains of all industries, and the heating and cooling industry is no stranger to these strains. As resources and labor became more expensive to obtain, HVAC component manufacturers had no choice but to increase material costs. These material costs continued to rise when it came to HVAC service providers due to higher shipping costs and a supply cannot support the demand. However, just because prices are increasing does not mean routine service becomes optional. Keeping up with routine HVAC system maintenance will save you big in the long run.
The only way to know is to check with a pro!
Do not wait until it’s too late, stay ahead of your HVAC system needs and call the professionals at Harder Electrical & Mechanical Services, Inc at (505) 281-4807 for a free estimate or to schedule a maintenance appointment.
About Harder Electrical & Mechanical
Founded in 2003, Harder Electrical & Mechanical Services provides residential and commercial heating, cooling, and electrical services. We have proudly served the Albuquerque, Tijeras, Edgewood, and Moriarty areas for nearly 20 years. Locally owned and operated, Harder Electrical & Mechanical Services is open five days a week.
Harder Electrical & Mechanical was founded with the philosophy of providing quality services for a fair price. With extensive training in electrical, mechanical, and refrigeration, Harder Electrical & Mechanical not only stands behind the work we do – we guarantee it.
Our experienced technicians provide residential and commercial heating, cooling, and air conditioning services. We can repair, replace, and install all brands of equipment, and we provide a 1-year warranty on labor along with any manufacturers’ product warranty. Harder Electrical & Mechanical is your one-stop shop for all your electrical, heating, and cooling needs. Call us today at 505-281-4807 for a free estimate.