Escalating Inflation and Depleting Labour Worst Construction Worries

PRICE INFLATION and a depleting labour supply are now of greater concern than product availability in most construction sectors, according to the latest statement from the Construction Leadership Council Product Availability working group.

Across the board, managing price volatility and diminishing labour are now the biggest issues affecting construction. As well as labour shortages affecting manufacturers, the greatest concern is expressed by housebuilders and SME builders, as it takes at least three years to train a skilled tradesperson.

Lead Times for Roof Tiles 

Long lead times for roof tiles continue, although there is a good supply of most products and materials. Other materials experiencing ongoing challenges include bricks, aircrete blocks, chipboard flooring, gas boilers and other products requiring semi-conductors in sub-components, all of which will be subject to longer lead times throughout the year.

The market is becoming more adept at managing supply of these critical products, and the long-term nature of some of the underlying issues. Although there are reports of delays in supply of boilers leading to extended completion times in new housing, new semi-conductor capacity is coming on stream in late 2023/2024, and expansion in existing capacity will feed into the market over the same timescale, the CLC says.

Demand

Demand remains strong in all areas, and this is set to continue into the autumn, although some product forecasts now anticipate a slight slowdown in housing starts towards the end of the year, stemming from rising prices and concerns about affordability. Home improvement work will depend on levels of consumer confidence as costs of living rise.

Transport

Members of the group raised concerns regarding the threatened rail strike. This will affect aggregate and concrete deliveries to major infrastructure products, highlighting the need for government to prioritise transport of construction materials should the strike go ahead.

With Shanghai gradually removing covid restrictions, production should normalise in the region by mid-June. Shipping analysts warn, however, that this may exacerbate the current bottlenecks in deliveries to the West.

Energy and Fuel

The cost of energy and fuel are major drivers for price volatility. Initial results of the Group’s horizon scanning exercise suggest energy hedges are short term and very significant increases are expected to come through quite quickly. This will particularly affect energy-intensive products including steel, glass, plasterboard, cement, ceramics and porcelain.

Although steel prices have come down slightly, since initial disruption following the outbreak of war in Ukraine, energy prices remain a major issue and price volatility will continue.

Inflation and Depleting Labour

Market prices will also be affected by the Indian Government’s unexpected increase to export duties on iron ore and steel, effective from 22 May.

The CLC group will continue to actively engage with energy intensive manufacturers over the coming months, and closely monitor market conditions and the impact of any further price increases and volatility.

The monthly statement is from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group.

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