Residential contractors face equipment delays and price spikes as the HVAC industry adjusts to ongoing inventory problems
It鈥檚 not just automakers and semiconductor manufacturers that have been hit by surging prices, material shortages and other supply chain problems in the last year and a half. The residential HVAC industry is also grappling with many of the same issues.
In the 20 months since the COVID-19 pandemic swept the world, disrupting long-established production and delivery schedules, manufacturers say they鈥檙e struggling to source the steel and components necessary to make furnaces, air conditioners and other HVAC equipment. The problem, which is unlikely to improve anytime soon, has led to backlogs, significant price increases, and homeowners impatient for their equipment to be repaired or replaced.
Contractors have responded by raising prices where they can, stockpiling components and just trying to figure out how to navigate a market that often doesn鈥檛 make sense.
Just ask Paul Heimann, the vice president and controller at St. Louis-based Welsch Heating & Cooling Co.
鈥淲e鈥檝e been seeing price increases for everything in our business,鈥 Heimann said. 鈥淭he flat metal that we buy to make our ductwork is probably two-and-a-half to three times higher than at the start of the year.鈥
Unprecedented increases
Major HVAC equipment makers such as Trane, Lennox and Carrier have raised prices anywhere from 2% to 30% this year on systems or parts. In some cases, the price hikes 鈥 which were historically annual 鈥 have become almost quarterly events.
For their part, manufacturers say they have little choice, with the price of many materials spiking 30% to 50% in the last year.
鈥淎s raw materials prices have continued to rise considerably, this is also driving a 3% to 4% increase in our component costs,鈥 said Aaon Inc. President and CEO Gary Fields when he announced a June 1 price increase.
鈥淲e intend to stay ahead of these inflationary pressures and must increase the price of Aaon equipment.鈥
Price changes are also a regular occurrence at GP Systems, a residential HVAC contractor in Chillicothe, Ill., that recently became part of The Waldinger Corp.
Project manager Bill Goad said GP鈥檚 costs on some materials have almost doubled.
鈥淚 just noticed that flat-stock sheet metal went up from $45 a sheet to $75 a sheet,鈥 he said. 鈥淚t鈥檚 a $100 hit, maybe a $200 hit on a job. It鈥檚 not a big deal, but at the same time, when your net profit on a job is thin to start with, that鈥檚 not what you want to see. That can be a big number off the bottom line.鈥
As if the increase in costs wasn鈥檛 enough, many residential contractors say they鈥檙e starting to experience delivery delays as well.
鈥淥ur Carrier dealer has a major facility here in town, and usually it鈥檚 like call them up and pick it up,鈥 Goad said.
鈥(Now) we鈥檙e seeing some significant shortages in key movers, like 2 陆-, 2-ton, 3-ton stuff 鈥 the standard stock items.
鈥淲e don鈥檛 even quote it until we see what鈥檚 available,鈥 he added.
Heimann said Welsch has taken to stocking more materials, equipment and components than it normally would to ensure that customers don鈥檛 have abnormally long wait times.
鈥淲e鈥檙e busting at the seams, let鈥檚 put it that way,鈥 he said. 鈥淲e鈥檝e actually taken on some additional space this year, just to bulk up our inventory because of material shortages and equipment shortages.鈥
Customers accept new prices
If there is good news buried beneath the never-ending headlines about shortages and escalating costs, it may be that they don鈥檛 seem to be affecting consumer demand. Homeowners are still eager to install new equipment or fix malfunctioning units. And that means that price increases can usually be passed along without much complaint.
鈥淐ustomers seem to be more willing to spend money than we鈥檝e ever seen them,鈥 Goad said.
Not all contractors are suffering with shortages of materials or equipment. Jeff Laski, the owner of S&M Heating and Air Conditioning in Southfield, Mich., said his company had more supply chain problems last year than in 2021.
鈥淎nything that I need, I haven鈥檛 had a problem getting,鈥 he said. 鈥淭his summer, we didn鈥檛 have any issues at
But that doesn鈥檛 mean his costs haven鈥檛 increased. Like most HVAC contractors, Laski said he鈥檚 endured multiple price increases from manufacturers in the past year, but he said he鈥檚 used to it. 鈥淚t鈥檚 like every commodity,鈥 he said. 鈥淭hey鈥檙e finding reasons why it has to go up.鈥
Sometimes they blame steel prices or a shortage of other raw materials or components, such as fittings or copper. 鈥淚t鈥檚 like this is their chance to raise prices,鈥 he said.
Fortunately, S&M鈥檚 suppliers have been holding the price of equipment needed for the company鈥檚 long-term projects, Laski said. But for most residential items, that鈥檚 not the case
鈥淩ight now, going into furnace season, the prices are going up. Air conditioners went up again last month: 4%, 5%, 6%. And we just add it on to the price. If someone wants a new furnace or air conditioner, we just automatically add in the new prices,鈥 Laski said.
And most homeowners accept it.
鈥淲e really haven鈥檛 lost any (business) because of the price,鈥 he said. 鈥淚 mean, we don鈥檛 get everything that we bid, but we do pretty well.鈥
Published: December 9, 2021
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