Building Materials Distributors
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 10,200 building materials distributors in the US purchase and resell a variety of products used in the construction of residential and commercial structures. Companies may offer a wide range of products or specialize in a category, such as roofing materials. Companies often offer related services, such as materials delivery, technical assistance, logistics, design, and fabrication. Customers include contractors, home builders, building owners, and resellers (dealers, home improvement stores).
Dependence on Construction Industry
Demand for building materials is highly dependent on the health of the construction industry, which is cyclical and vulnerable to economic conditions.
Building Materials Cost and Supply
The cost of building materials can vary, depending on pricing trends for underlying commodities.
Industry size & Structure
The average building materials distributor operates out of a single location, employs 23-24 workers, and generates $16.5 million annually.
- The building materials distribution industry consists of about 10,200 companies that employ 245,000 workers and generate about $170 billion annually.
- The industry is concentrated; the top 50 firms account for about 47.5% of industry sales.
- Many companies are small, independent operations and serve a local or regional geographical market.
- Large companies include ABC Supply, Builders FirstSource, Allied Building Products, and Beacon Roofing Supply. Large home center chains, such as Home Depot and Lowes, are also major suppliers of building materials.
Industry Forecast
Building Materials Distributors Industry Growth
Coronavirus Update
Apr 29, 2022 - Russia’s Invasion of Ukraine Disrupts Timber Trade Flows
- Russia’s invasion of Ukraine is disrupting global wood product trade flows, especially in Europe. According to Wood Resources International, Russia, Belarus, and Ukraine exported 34 million tons of lumber in 2021, and 25% of that volume was exported to countries that have sanctioned Russia and Belarus. Europe’s timber imports from Russia and Belarus accounted for nearly 10% of the continent’s consumption in 2021. Wood certification organizations Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC) have designated all timber from Russia and Belarus “conflict timber,” which cannot be used to manufacture certified products, including lumber and plywood. Even after peace returns to Europe, timber trade flows have likely been permanently altered.
- On April 8, 2022, President Biden signed the Suspending Normal Trade Relations with Russia and Belarus Act which stripped the two countries of their “most favored nation” trade status. The move opens the path for significantly increased tariffs on imports of wood products from Russia, including plywood. In 2021, US imports of Russian veneer, plywood, and engineered wood products totaled $396 million, or a little over 3% of total imports. However, Russia directly accounts for about 10% of all US hardwood plywood imports, according to Forest Economic Advisors. By selling timber to major hardwood plywood producers such as Indonesia and Vietnam, Russia may indirectly supply another 10%. According to the Decorative Hardwoods Association, higher tariffs on Russian plywood imports are likely to benefit domestic producers.
- Lumber was trading near $912 per thousand board feet on April 28, down from the record high of $1,670 per thousand board feet on May 7 but up from $462.20 per thousand board feet on August 17. Lumber prices have oscillated widely during the coronavirus pandemic, falling from the mid-$400s in January 2020 to $264 in late April before surging to $948 in September. The price then dropped to $495 in late October 2020 before starting a fairly steady climb to the record set on May 7, 2021.
- Rapidly rising home prices have increased homeowner equity which is expected to boost residential remodeling spending through 2022, according to the Leading Indicator of Remodeling Activity (LIRA) report released in April 2022 by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 15.8% year over year to $406 billion in the second quarter of 2022. On a year-over-year basis, Q3 remodeling spending levels are forecast to rise 19.7%, then drop slightly to 17% growth in Q4. Year-over-year growth will slip further in Q1 2023 to 15.1%. Home improvement spending is projected to taper off beginning in the third quarter of 2022 amid rising financing, materials, and labor costs and concerns about a possible economic slowdown.
- Homebuilder sentiment, as measured by the National Association of Home Builders/Wells Fargo Housing Market Index, decreased to 77 in April 2022 from 79 in March, marking the fourth consecutive monthly decline. Higher materials costs and rapidly rising interest rates are making housing less affordable, which is weighing on builder confidence. Builders report that sales traffic and current sales conditions are at their lowest level since summer 2021 as higher mortgage rates and supply chain disruptions have unsettled the US housing market, especially for potential firth-time homebuyers.
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