All of us involved in construction are acutely aware of the rising costs in building materials over the last few months, but what exactly is the cause, and when can we hope for a return to normal prices?
Cause & Effect
The most obvious cause of a recent rise in costs has been the global pandemic and associated restrictions on travel and free movement, but other factors have also contributed. Take the unlikely Snow event which hit the southern US earlier this year. This seriously affected Oil production and output, thereby increasing prices. Given the fact that oil is used in the production of so many products, this has had an inevitable impact on the price of raw materials. A real-world example of this effect has been pipe supplier Wavin having to warn buyers of a 5-20% increase in costs so far this year. They are not alone, however, with many industries and manufacturers in Ireland facing similar hikes.
Even here in Ireland, Timber supplies are struggling to keep up with demand, with prices soaring up to 30% in some cases. That’s if you can even get your hands on some at the moment with many builders reporting great difficulty in sourcing timbers. Ireland is usually an exporter of timber, so this is certainly unexpected. However, in combination with pandemic related restrictions and licencing issues regarding tree felling & planting, there is a serious delay in meeting the current demand, which in turn is increasing prices across the board.
Steel is much the same, with CIF members reporting an increase of 10-20%. One in 5 members says it can’t source any steel at all right now. It’s a similar story with cement, as an increase of 6-10% is being reported.
So when are things expected to return to normality? One would hope as the world comes out of lockdown and trade resumes to full potential, costs will come down significantly, however, there are other reasons for such a run on materials at the moment. As a result of the lockdown, many people across the country have decided to carry out home improvements, which has put real pressure on the industry for materials. We can only hope that this will be a short burst of activity and demand will drop as the year closes.
Regarding timber, the outlook is positive in that once licencing issues are resolved and supply can pick up again, prices will relax to previous levels. This is expected to happen early next year.
Another factor to keep in mind, which has greatly affected prices globally, is President Joe Biden’s $2 Trillion recovery package, which is enabling US-based operators to pay top dollar for products including timber. This is set to continue for some time and will inevitably have an effect on pricing going forward. Definitely, something to keep an eye on.