In our latest Market Insight piece, we take a closer look at what’s happening in the global marketplace and how this is impacting on material costs closer to home.
As many will be aware, there have been a series of steel price increases announced between 4Q20 and 1Q21 amounting to circa £200/t with further price increases expected in the coming quarters. A combination of factors is fuelling the price hikes, including reduced production capacity as a result of Covid-19, a global shortage in raw materials and high demand, particularly from China. Returned Tenders are holding prices for minimal periods and/or seeking to adjust tenders for fluctuations between returning tenders and receipt of orders.
The impact on steel price changes is starting to filter through to other steel-based products and items such as reinforcement, metsec, metal decking and ductwork are also beginning to see price increases, albeit not quite to the same extent.
Shortages of raw materials for the production of insulation products led to price rises in January with further rises expected in Q2 and the availability of timber products has reduced as a result of a sharp rise in shipments to North America.
Global supply chains have been disrupted by the pandemic with reduced production capacities leading to shortages of materials and components. This is further exacerbated by increased shipping costs brought about by reduced processing of goods through ports and subsequent shortage of shipping containers. The increased shipping costs are being recouped through increased material pricing and lead times are being extended.
It remains to be seen if/how quickly the roll-out of Covid-19 vaccination programmes will impact upon productivity levels and bringing production back to pre-pandemic levels, however as the wider construction market ‘opens’ and previously mothballed projects progress to site, material demand is likely to remain high for the foreseeable period.
The longer-term impact of Brexit is yet to be understood, but in the short-term, increased paperwork is cited as having an impact (both cost and time) together with a reduction in the availability of skilled labour from Europe.
Closer to home, the impact of the disruption to the Local Supply Chain over the past year is still being felt as the failure of sub-contractors and suppliers continues, placing further pressure on the remaining supply chain to cope with increasing demand.