Insulation costs are rising in North America, but it’s not typically the material sector builders keep their eyes on. Insulation comes in so many forms that the market is actually complex compared to more uniform building material categories.When builders talk about material pricing and trends, they’re often looking at lumber markets, or other supplies that depend on the availability of natural resources. Drywall for example is made of a gypsum, which is actually mined.
Other materials shipped through the global supply chain can also impact prices. For example, as a direct result of COVID-19, steel and aluminum supply from China is restricting the transport of materials like fixtures overseas to US builders. Is it also impacting insulation?
Rarely does the building industry mention insulation prices (aside from those dedicated to thermal manufacturing and regulation), and yet the costs of insulation are rising from Toronto to Texas. Our first RenoRun Report, featuring Q1 building trends revealed that insulation costs had risen significantly from the previous quarter, and we’re here to find out why.
Insulation Use Inside North American Markets
North America has a wide climate range with many different types of building structures that rely on many different types of insulation (that’s partly why it’s so interesting that our report revealed a dramatic insulation price increase across different regions and climates!).
Insulation in Canada
In Canada, insulation is regulated by the National Energy Code for Buildings, and the Federal government has restricted the use of insulation materials that can harm the ozone layer. Weather plays a starring role, but policies mainly help to drive market growth as Canadians seek increasingly energy efficient and environmental solutions. Canadian Provinces also have regulatory bodies dedicated to insulation, such as the Association d’Isolation du Québec and the Master Insulators Association of Ontario.
Insulation in the United States
The United States Federal Department of Energy regulates thermal materials in the US, who consumes the most insulation in North America (USD 5.62 billion of 7.09 billion). This is partially driven by relative population, but also by policies regulating the use of insulation. Federal assistance programs in the US, through the Weatherization Assistance Program are helping to promote and grow the North American insulation industry. Rising energy costs further incentivize customers to better insulate their homes as well. Glass wool and EPS are the leading sub-categories of insulation and have been for some time now in the US market.
Insulation in North America
While there is no outright leader, Dow Building Solutions, Owens Corning Corp., Johns Manville Corporation, Huntsman International LLC, and CertainTeed Corporation, make up the majority of the mature insulation market of North America, which according to Global Insulation was worth about USD 7.09 billion five years ago. They wrote about the North American Insulation Manufacturers Association (NAIMA) 2018 Canada/US survey, reporting that in the production of thermal and acoustic insulation for both residential and commercial purposes, their members used:
- 1.17Mt of recycled glass
- 0.45Mt of recycled blast furnace slag
They also reported:
- According to volume, glass wool made up 44% of the North American market, followed by expanded polystyrene at 23.5%
- Roof and wall projects make up the majority of the industry
- The prevalence of older homes in the US that will inevitably need refurbishing, will help to grow the insulation market
- Residential purposes makeup more than half (52%) of the market revenue
- Non-residential construction consumed 2.77 million tons of insulation in 2015
And while insulation trends are somewhat stable, given the regulations from all levels of government, and consumer need/demand, it’s actually a material that is price sensitive. In 2019, the North American Building Thermal Insulation Report predicted market growth and declining costs. But that was then and this is now.
Insulation Prices on the Rise: Findings From the RenoRun Report
We recently released our first RenoRun Report, featuring exclusive local data about material prices, labour wages and more. We released local data in three cities where we currently operate:
- Toronto, Ontario
- Montreal, Quebec
- Austin, Texas
The RenoRun Report combines our extensive proprietary data sets, with our own consumer survey results, in combination with State-level monitoring and historical databases. The results help builders benchmark themselves, better understand their local markets, and enrich planning processes.
Across all three city-level reports, the price of insulation had risen significantly. In Montreal, insulation had the second-highest price increase over the last nine months compared to all other materials except hardware. Insulation prices rose 5.9%, with 3.8% of that growth occurring in Q1.
In Toronto, insulation also had the second-highest price increase at 5.1%, except for lumber at 8.7%. 4.9% of that growth again though was just in Q1. In Q1 insulation saw the highest price increase of all materials.
In Austin, lumber saw the biggest increase, but insulation was a close contender, with all 3.8% of its price increase occurring in Q1 alone. Since Q1 was the beginning of the COVID-19 crisis we can begin to speculate why such dramatic increases in insulation prices happened early this year.
Obviously COVID-19 is Behind Q1 Insulation Price Increases
Within the thermal insulation market there are a ton of different materials builders can choose from. Since the market encompasses all of them it’s not always obvious which submarkets are driving trends. For example, the cost of styrene was a key factor in driving up the overall cost of insulation in 2017. These types of submarket outliers are likely to have played a role in the Q1 spike, given that glass wool is the most used building material in the largest insulation market, and it’s largely produced overseas.
Taiga Building Products is the distributor for Johns Manville and DOW Chemical Canada insulation products. They reported an increase in Q1 2020 earnings as a result of increased commodity prices. However, the earnings report also reported a steep decline in sales at the end of the quarter as COVID-19 hit North America. Owens Corning actually lowered prices in the first quarter to offset losses in China.
As a building community we all wish the answer were different, but COVID-19 has played a huge role in driving up all kinds of material costs. Despite the dip in oil prices, reliance on overseas markets that were hit first by COVID-19 likely drove the commodity price increase in Q1. China has been responsible for the majority of the world's glass fibre production for the last decade. Grand View Research says:
“The shortage in supply of raw materials from Chinese manufacturers has resulted in a severe demand-supply gap. The manufacturers are further expected to be stranded on raw material orders owing to the logistics industry being significantly impacted due to lockdown amid COVID-19. However, the producers are expected to move away from China aiming to reduce the future risks that would affect the business and to reduce the manufacturers' cluster in a single country in order to smoothen the supply chain.”
We will continue to monitor the cascading effects of COVID-19 on the building industry, the impacts of which are being felt by everyone.
Eyes on Insulation Prices in Q2
The insulation market is dynamic and made up of many different types of raw materials, with different considerations. Yet the price of insulation responds to global markets, despite its diversity, because large sub-categories like glass wool dominate usage in the US. As such we found in our RenoRun Report, that the price of insulation increased dramatically in Q1 2020 at a local level in three different North American cities. The price increase varied by which country, and region the builders were in. COVID-19 impacting international supply chain dependencies was the most likely driver of price increase in these local markets. We’re looking forward to releasing next quarter’s report to see how the Q1 results compare.
Click on the links below to download a copy of each city’s Q1 RenoRun Report. If you’d like to be part of the next RenoRun Report, reach out to Andrew Riachi: email@example.com.
All screenshots taken June 2020 by author.
Image 1: Screenshot via Global Insulation
Image 2: Image Property of RenoRun from RenoRun Report: Toronto Q1