For years, the price of shingles remained relatively the same, but then in 2008 the prices for shingles vastly increased, to the point where they were almost double their original market value.
According to Earl Ward, a prominent figure in recent Roofing Insights’ videos, there were a couple very clear and defined reasons for this sudden increase.
Ward says that while the initial shock of the 2008 price increase sent contractors into delirium, the rapid rise in prices also had a positive effect because contractors were forced to jack up their prices to consumers, and since homeowners needed new roofs, the contractors benefitted as a result.
There was a perfect storm, and it wasn’t a bad thing for the industry. In fact, I think it was one of the best things to happen to our industry,
Ward says of the price increases that forced contractors to adapt their business models to meet the demand of their new overhead.
Ward goes on to explain that there were a few major occurrences that happened back in 2008 that ultimately led to the swift rise in the price of shingles.
One involved industry conglomerate GAF acquiring a company by the name of Elk. This acquisition happened in 2007 and led to a ripple effect that many people did not anticipate.
Elk had the technology of producing a low-cost laminate. They were the first manufacturer to eliminate three-tabs and they only made a laminate. That was their focus, and they developed a method that made them the lowest-cost producer,
Elk also dominated the market because their new mode of production made them cheaper than all their competitors. In that sense, Elk’s new strategy coincided perfectly with a company like GAF who was looking for a way to leave their mark on the roofing industry.
Soon after their partnership, GAF was marketing a new wave of not only low-cost shingles, but also shingles that were much lighter than that of their competitors.
Up to that point, no shingle manufacturer had ever produced shingles as light as GAF was producing, but with clever marketing backed by the support of their engineering team, GAF was confident they had developed the next great shingle.
If you talk to GAF, they will say that they took the fat out and kept the muscle. That was one of the ways they advertised that their weight was going down,
While GAF was celebrating their new revolutionary shingle technology, industry staple IKO was going a different direction and emphasizing to contractors and homeowners how the added weight of their shingles was actually a benefit.
As the former owner of a distribution center, Ward stakes no claim as to which shingle weight is more ideal, but he did acknowledge that GAF’s production process was more cost-effective, and thus contributed to their later success.
When shingles went to fiberglass versus organic, rather than soak in the organic matte in asphalt, you could encapsulate fiberglass tubes around the asphalt,
says Ward, in explaining what specifically helped optimize GAF’s shingle production and keep costs down.
This new fiberglass that was surrounding the asphalt is key to this whole story because asphalt is the most expensive part of the shingle, and it accounts for 33% of the entire shingle.
Therefore, with a reduction in the amount of asphalt being used, both price and weight came down.
But there is one element to the lighter asphalt shingle that often gets overlooked. This is the fact that the price of asphalt is dependent on the cost of petroleum.
Therefore, when contractors saw an uptick in prices for shingles in 2008, it was not on account of greedy manufacturers (like some contractors had speculated), but instead it was the manufacturers simply reacting to the prices that they were seeing on their end.
For context, Ward says his company at the time was selling shingles at $45-$50 per square, but by the end of the summer that number was up to $80-$90 per square.
At that point we had a crisis and shortage of asphalt,
Companies started to get in a position where they could control the supply of asphalt through refinement methods, versus just being a byproduct and having to sell it to an open market.
When prices skyrocketed, it also meant that shingles were not being produced at the same volume. In fact, the price increase affected both distributors and contractors disproportionately.
When petroleum went up to $140 per barrel, asphalt went from $350 per ton to $1,000 per ton in about 30 days, resulting in shortages and crazy price changes.
That’s what ultimately drove the price of shingles up in 2008,
What do you think?
Are the prices for shingles in today’s market too high?
Leave us a comment below, and don’t forget to subscribe to Roofing Insights so you never miss any of their upcoming content!