Client Advisory

by the Benchmark Technical Committee

Polyisocyanurate Roof Insulation

The roofing industry is coming to grips with a shortage of polyisocyanurate roof insulation, a shortage that will likely continue into 2006.  High demand and a shortage of raw materials are causing longer than usual lead times for polyisocyanurate insulation deliveries, as well as substantially higher prices.  This advisory is meant to create awareness of this potentially disruptive material shortage.  

Polyisocyanurate foam contains a chemical called MDI (methylene diphenyl diisocyanate), which is a very useful compound.  In addition to being a key ingredient in polyiso foam insulation, it is also widely used in such things as athletic shoes and oriented strand board (OSB).  The demand for MDI has outstripped supply in part, because 35% of domestically produced MDI has been purchased by China , at higher prices than historically paid by U.S. insulation manufacturers.

Today, there are five primary manufacturers of polyiso foam insulation.  Hunter Panels (owned by Carlisle ), Firestone Building Products, Johns Manville, Atlas and R-Max.  The first three companies also manufacture roofing membranes; the other two do not and are independent in that regard.  These five manufacturers have a number of private label agreements with some of the other roofing membrane manufacturers, which then resell that insulation as part of a "total roof system" warranty.

There are several important issues as a result of this shortage:

Disruption of Traditional Supply Methods

Polyiso manufacturers are adjusting how they supply the market.  One of the first decisions made by Firestone, Johns Manville, and Hunter Panels/Carlisle, is to supply insulation under their roof membranes first, and then to supply others if product is still available.  Roofing membrane manufacturers who do not also manufacture polyisocyanurate insulation would appear to be at a significant disadvantage, and may coach their contractors and owners to use other insulation materials, particularly if project timing is critical.

Pricing Uncertainties

Polyiso prices have been rising monthly, and we are told they may rise from 20% to 40% in the next six months.  Long-term contracts guaranteeing stable pricing of MDI have been canceled, so polyiso manufacturers cannot protect pricing of their products more than a few weeks into the future, and may not offer any pricing guarantees.  As a result, contractors are being advised to insert "escalation clauses" in their bids as a means to protect themselves from unrecoverable price increases.  

Schedule Delays

Polyiso manufacturers are having to deal with this shortage, and one of the ways they do this is to put their distributors on allocation.  Each distributor gets a pre-determined number of truckloads a month, and has to determine how they can maximize their profit with the least long-term damage to their existing relationships.  As a result, the largest customers (large roofing contractors) may well get preferential treatment when scarce insulation is being distributed.  The days of the "FedEx Iso" (shipping Iso the same day), as one manufacturer put it to me, is over.  

We have particular concern with new construction schedules, as there is already urgency in getting a building in the dry.  Current delivery schedules are eight weeks or longer, and are not expected to improve in all of 2005.  And as this shortage becomes more public, contractors may use this shortage to their advantage, saying that they are waiting for insulation, when perhaps in fact, they are just stalling.  

Insulation Substitutions

The lack of polyiso availability to meet a project schedule or the increase in cost from the bid price to the delivered price may cause some contractors to ask to substitute other materials, in lieu of polyisocyanurate.

Three of the more important attributes of polyisocyanurate insulation include its superior insulating value, fire resistive qualities and its compatibility with hot asphalt and solvent based roofing adhesives.

Insulating Value:  Polyiso insulation has an approximate R-value of 6 per inch.  Alternate foam insulation such as expanded polystyrene (EPS) and extruded polystyrene (XPS) have R-values of 4.17 and 5.0 per inch, respectively.  So achieving the same R-value requires greater thickness of these two products, than with polyisocyanurate.  This may have an effect on HVAC curb heights, door thresholds, wood blocking at the perimeter, etc.

Fire resistance:  Polyiso board insulation is FM Class 1 rated when applied directly to a steel deck.  Possible alternate foam insulation products such as expanded polystyrene and extruded polystyrene applied to a steel deck are not FM approved, and require the use of a fire barrier, such as a layer of perlite or gypsum board.

Compatibility with Hot  Asphalt or Solvent-based Adhesives:  The substitute plastic foam insulations (EPS and XPS) are not generally compatible with hot asphalt, due to their low melting point, and they are also not directly compatible with bonding adhesives used particularly with single-ply membranes.  It is possible to substitute a urethane insulation adhesive in lieu of hot asphalt, but at an increase in cost, and subject to FM testing and approval.

Strategies in Dealing with the Shortage  

In 2004, Benchmark prepared specifications for 196 roof improvement projects, 80% of which employed polyisocyanurate insulation.  This shortage will undoubtedly have an impact on most all 2005 roofing work.  Prices will be higher, delivery lead times will be longer and some projects may not be completed on time.  We hope this advisory will create an awareness of the problem, and help prepare our clients in understanding and working with us to minimize its impact.  We offer these possible strategies:

1.     Bid projects as early as possible.  This will improve the chances of getting insulation on order early in the year, lowering costs and getting your place in the delivery process.

2.     Consider bidding alternate insulation packages if possible, to give contractors an alternative to polyiso- cyanurate.  If an escalation clause is attached to the winning bid, ask to see both the quote on which the bid is based, and then the actual amount paid for the insulation.  Attempt to limit the increase to that actually incurred by the contractor.

3.     Expect any quotes or budget numbers developed after late 2004 to likely be lower than actual bids.  Look at bid alternates as a way to secure bids that meet budget requirements.

4.     Once a project is bid, make a decision and get the project under contract quickly.  Responsible contractors will not hold bid prices for long.  Prepare management to act quickly.

5.     Be patient.  This shortage is like a traffic jam.  We can fume and vent all we want, but we will get there when we get there.