Contractors are facing “serious difficulties” after prices of certain construction products have soared by a fifth already this year, a key body has warned.
The Construction Leadership Council’s (CLC) product-availability working group said it would work with ministers to understand where costs might rise further as a result of the war in Ukraine.
Construction material prices rose in 11 of the 12 months of last year, according to figures published by the government, with contractors paying on average a fifth more for vital products and components by the end of 2021.
Now the CLC has revealed that some building products that are particularly energy-intensive to manufacture have gone up by another fifth already in 2022. Further inflationary pressure is expected as a result of the crisis in Ukraine and the breakdown of the West’s relationship with Moscow.
In an update this week, CLC product-availability co-chairs John Newcomb, who is chief executive of the Builders Merchants Federation, and Peter Caplehorn, chief executive of the Construction Products Association, said inflation was proving “a root cause of serious difficulties for contractors”.
They added: “The worldwide condemnation and imposition of sanctions on Russia and Belarus in response to Russia’s military invasion of Ukraine will likely have enormous implications and an impact on global trade, particularly on commodities, for years to come.”
Although little over 1 per cent of building-product imports to the UK come from Russia, Ukraine or Belarus, the working group stressed there were knock-on effects from the conflict.
“There are likely to be higher levels of direct and indirect exposure to some product components either through raw materials such as aluminium, copper, bitumen, pig-iron and iron ore used in the manufacture of steel, or through higher prices in more-exposed European markets,” the chairs said.
“In addition, sanctions against individuals with links to the regime in Russia and firms with Russian ownership may affect the UK supply chain.
“Russia is also a major supplier of crude oil and gas. Should sanctions be applied to energy products, replacing gas from Russia globally will lead to even greater price volatility for energy-intensive products.”
The European Federation of Building Material Distributors (UFEMAT) has urged members to stop importing Russian building materials while war rages in Ukraine.
A statement sent to members said: “Ukrainian producers of building materials are donating their products to build roadblocks to help stop the advancement of Russian troops.
“UFEMAT calls upon all of its European members to place an embargo on importing all Russian building materials until the war in Ukraine comes to an end.”
Construction consultancy Linesight said the conflict in Ukraine had resulted in “volatility” in the pricing and availability of critical raw materials, including steel.
Crude-oil prices hit their highest point for almost eight years on the global market this week, the firm said in a statement, while UK wholesale gas hit new cost records. Both of these affect supply chain transport costs, said Linesight.
“Crude oil is also used in the process of steel production and the price surges are having a knock-on effect on the price of steel.”
It added: “Ukraine is a key exporter of steel products and iron ore. In terms of other materials relevant for construction, copper has been impacted, with Russia controlling about 10 per cent of global copper reserves, as well as being a major platinum and nickel producer.”
UK brick-maker Forterra said in its annual results this week that it had delivered “significant” hikes to its selling prices on 1 January 2022 and lined up “further double-digit price increases” from 1 April.
Forterra’s revenue was up to £370.4m in the 12 months to 31 December 2021, from £291.9m the prior year. It made a pre-tax profit of £56.8m after a loss of £5.4m in 2020.
“Selling-price increases leave the business well-placed to recover cost inflation,” it said.
Main contractors were this week urged to act immediately to avoid catastrophic supply chain disruption as a result of the war in Ukraine.
This article was posted on www.constructionnews.co.uk
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