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Published on 2/22/2022
Published by marketing@concretebroker.com.au
Building material costs continue rising in 2022
In late 2022 construction prices are predicted to start levelling out
Cover photo courtesy of accruent.com
It will take at least until the summer of 2022 before we expect the price of some building materials, notably concrete, bricks and cement, to drop. Construction firms' suppliers first need to improve their historically low levels of inventories. The price of timber and steel will probably settle down earlier.
From late 2020 to mid-2021, commodity prices for construction materials like lumber, steel, copper, and concrete surged to unprecedented levels. There were several factors behind the growth in prices. The pandemic disrupted production cycles and impacted the supply chain. Forest fires in the United States and Canada disrupted timber harvests and operations at sawmills. Strikes, labor shortages, and soaring energy prices affected the availability of both copper and steel products.
Photo courtesy of blog.bluebeam.com
Building material prices have soared
Building material prices have soared over the last 12 months, along with many other products. The cost of raw materials such as timber, plastics and steel have particularly surged. Supply chain disruptions, due to the Covid-crisis, decreased the supply of building materials just as output remained resilient during the pandemic. This has resulted in shortages and price hikes.
Raw material prices for metals and timber have come down from recent peaks. However, this is not yet reflected in the producer prices because it takes some time before these make their way through the supply chain. Besides that, the data lags a bit, as July and August producer prices are not published until now and are probably already showing some flattening.
Soaring prices for building material inputs
Producer Price Index in the European Union. Index February 2020=100
Eurostat, ING Research
Cement prices in 2022
In 2022 a slowdown in demand for cement towards a more normal 4% growth excluding China is projected. The coronavirus picture is steadily improving, with rising vaccination rates and the rollout of new drug treatments. Growth in housing is predicted to slow down, with a recovery in commercial construction and ongoing public works. Higher selling prices and easing cost pressures will combine to eventually restore industry margins. Mature market cement demand is supported by stimulus packages. In China, volumes are predicted to fall as the property sector declines. Elevated commodity prices will provide a strong economic boost to multiple emerging market regions, particularly in Africa and the Middle East. Southeast Asia is expected to recover after being hit particularly hard by the delta variant.
The Australian outlook
Source : The urban Developer
Construction costs across Australia are expected to keep rising next year with an industry forecast indicating they will jump by as much as almost 6 per cent.
Consultancy firm Rider Levett Bucknall has released a list of forecast construction cost hikes for capital and regional cities around the country in 2022.
According to its projections, costs will increase by 2.5 per cent in Darwin; 3 per cent in Adelaide, Melbourne and Townsville; 4.5 per cent in Perth; 5 per cent in Brisbane and Gold Coast; and 5.6 per cent in Sydney.
Throughout 2021, building material prices have increased prompting some trades to link supply rates as a condition of tender pricing and, therefore, subject to a price adjustment should the rate rise.
RLB’s New South Wales managing director Stephen Mee said upward pressure on contractor tender pricing was being experienced nationwide, albeit at differing levels.
“Melbourne, Canberra, Adelaide and Darwin have observed stable increases, generally within expectation,” he said.
“However, significant surges have been experienced in Brisbane, Perth and Sydney, with escalation forecasts for 2021 well above levels forecast at the backend of 2020.”
Mee said contractors have flagged the potential for material shortages, shipping cost increases and delays of imported goods and equipment but with pressure appearing to grow there could be further impacts to come.
“This has been most evident in Sydney where the analysis of current tender prices received in early December has resulted in revisions to the published 2021 and 2022 TPI (tender price indices) uplifts,” he said.
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Tags: building materials cement prices inflation pandemic steel timber
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