Building Supplies Soar In Wake Of Katrina


The rising cost of gas in the wake of Hurricane Katrina is just the beginning of the fallout consumers are likely to see in coming months. Katrina will impact the building industry, insurance rates and some grocery supplies. The building industry will likely experience the biggest spike.

"It's already happened," said Steve Sachak, manager of Lumbermens in Star Valley. "Half-inch OSB (a wafer-type board used in construction) went up 30 percent from Friday (Sept. 2) to Tuesday (Sept. 6)."

Sachak said the trend is expected to continue for at least six weeks.

"Prices are going up for plywood, lumber, roofing and sheetrock," he said." And some things are already getting hard to find. For instance, the Federal Emergency Management Agency just bought a million square feet of Visqueen (a plastic sheeting used in construction). Consequently, Sachak was instructed by his bosses to order enough for several months while there is still a supply available. He said he usually sells about 20 rolls per week.

"It's put a real damper on supplies," Sachak said. "Trucking's tight and freight rates are going up. Everything is skyrocketing."

He said he thinks those people who were just barely able to afford to build a home, may not be able to now.

Klay Clawson, general manager of Foxworth-Galbraith Lumber Co. of Payson, echoed Sachak's observation that prices have already increased.

"It's a function of the market," Clawson said. "Hurricane Andrew pushed prices up for about four months. Emotion is driving the market right now, but it will level off."

He said he doesn't see a supply problem created by Katrina because most of the wood coming into the United States comes from Canada, but he does see an increase in demand.

Joe Nation, manager of the Payson Ace Hardware, said his company does not do much with building supplies, however gas prices are having an impact.

"Fuel surcharges are sky high," he said. "We're absorbing them for the short term." He added that if prices continue to climb, he might have to adjust his pricing.

Insurance rates

Home insurance is another area that is likely to cost more for consumers.

"The more it costs to build a home, the more it will cost to insure it," said Scott Crabdree, president of Crabdree Insurance & Financial Services of Payson.

He said the insurance that insurance companies must buy to cover potential losses by their clients -- called reinsurance -- is also going to rise, and that could affect everyone to some extent.

"It's going to be complicated settling (claims) because a lot of people didn't have flood insurance. We cover wind damage and rain, but not flooding from rising ground water," he said.

And even those who carried flood insurance, which is a national program, may find the coverage coming up short.

Ted Pettet of State Farm in Payson, and Joe Gacioch, who oversees the regional Allstate agencies, said they don't see any significant impact to area consumers' insurance rates.

Each state regulates its own insurance industry. Gacioch said money is set aside from the premiums paid to cover losses.

Pettet said there may be an impact further down the road to the cost of doing business.

Grocery supplies

The impact of Katrina on the cost and supply of groceries is expected to be minimal, said Dan Dillon, manager of the Payson Safeway, and Richard Ludwig, owner of Sav-Mor foods.

Both Safeway and Sav-Mor deal primarily with West Coast suppliers. Some goods are also trucked from the Midwest, but almost none of their products come in through the Southeastern ports.

Dillon said he does get a few products directly from New Orleans, such as Millstone Coffee, and that could be a problem.

Ludwig said getting some fruits and vegetables may be a problem in the months ahead, but not right now.

John Posey, manager of the Payson Bashas', said the cost of fuel will eventually be reflected in the price of groceries, but other than that, he does not see an impact from Katrina on supplies.

Katrina dwarfs other U.S. disasters

Steve Sachak, manager of Lumbermens in Star Valley, shared industry information he received from the National Association of Home Builders regarding Katrina's impact.
The number of homes destroyed by Katrina is likely to dwarf the losses from any other U.S. natural disaster to date.
An estimated 200,000 homes in New Orleans alone are permanently uninhabitable. The NAHB, however, expects rebuilding will wait. Viable structures will be repaired first.
Materials most in demand will be roofing and wood panels (plywood and OSB).

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