A Perfect Storm - What has caused the shortage of materials in the construction industry?
- Lynden Dighton
- August 24, 2021
- 11:16 am
Materials in short supply
The shortage in raw materials in the construction industry is hardly breaking news and the supply issues have caused two main problems, lead times and increased cost.
It’s impossible to talk about a shortage of building materials without mentioning Covid. Covid has caused an economic and commercial slow down, followed by rapid demand, which is still going strong. It has also interrupted the production of many materials at source across the international stage.
The shortage is global, and all major economic players, including- China, the US and Europe, are experiencing the same problems following lockdown.
The Construction Leadership Council took a view on this earlier in the year when they reported that all sectors of construction – new housing, repair, maintenance and improvement/restoration – were picking up sharply after lockdown with further strain on the supply chain coming from the commercial and industrial sectors. Their view, back in March 2021, was that availability and supply would get worse before it got better, fuelled by the driver of continuous growth.
At Floorspan, we are experiencing unprecedented demand for our products. However, significant investment in our production site over the last decade has meant that we have been able to scale up production to meet demand and offer some of the fastest lead times across the UK for precast concrete flooring.
Additionally, we have invested in software so that we are able to absorb a greater number of enquiries and orders without compromising on the quality that our customers expect.
Shortages of timber, steel, pitched roofing, plastics and some paint coatings have, thus far, not abated. More recently, electronic components (something which is also badly affecting motor manufacturing) and bagged cement have joined this list. The sharp rise in demand has been worsened by a backlog over the last eighteen months where, like many other manufacturers and suppliers, we naturally scaled right back due to uncertainty over Covid and staff on furlough. Production also started slowly due to continued fears and disruption over Covid and demand quickly outpaced it in the construction sector. As a consequence, prices are rising across the industry. The Office for National Statistics has projected a rise of 7%-8% in price across the board with some products, like timber, expected to double throughout 2021.
Right on down the line
It’s easy to focus on the materials themselves but every step in the supply chain seems to have issues. For instance, there is currently a lack of HGV drivers so even if your item is available and shipped, haulage is slowing things down. New rules for hauliers plus the added burden of Brexit have not helped.
The ‘pingdemic’ of workers having to self-isolate has further disrupted manufacture and distribution.
A perfect storm of weather has hit specific raw materials with warmer than average winter temperatures, affecting timber production in Scandinavia whilst unexpectedly colder temperatures in Texas have impacted polymer, chemicals and plastics.
Shipping costs have risen at a phenomenal rate due to empty container traffic arising out of Covid which impacts on the transport charges for those products which are getting through. Shipping lanes across the world are incredibly busy and ports in Asian countries are still being quite badly affected by the pandemic; this has an impact in the UK even though we are hopefully moving towards the end of our Covid problems. Even the blockage in the Suez Canal had a part to play.
On a domestic level, the popularity of home improvements fuelled by so many people being at home during lockdown has also put pressure on materials supplied by national DIY chains and builders’ merchants.
pRICE fLUCTUATIONS
One of the biggest challenges for the larger construction companies is being able to deliver a project to cost, a price that may have been calculated at an earlier point and which could be subject to wild variations on raw materials. Prices are continuing to rise with RICS citing a forecast for the second quarter of 2021 of 2.6% and a 7.2% annual increase overall.
a cOMMON SENSE APPROACH
Those companies able to buy in bulk and buy ahead invariably are experiencing less difficulty but smaller firms and individual builders, who have neither the financial reach nor the storage space, are suffering more. The Federation of Master Builders has issued a gloomy prediction that some small building firms may have to close as a result.
Forward planning, reliable supply chains and manufacturers are the key to positively tackling what is, in many ways, a challenging period. However, the situation is made complex by different individual products which are experiencing their own supply problems. It is hard to take a broad brush approach if you are reliant on several different materials all with unique factors and timescales.
wHAT nEXT?
Most people understand the why of the situation but what it boils down to for construction companies and individual builders looking for materials is when and how much. Industry pundits predict no change in the situation throughout 2021 but perhaps the bigger challenge is not dealing with the shortage of materials but the unexpected price fluctuations which can make it difficult to stay on budget. A move towards a more American style contract basis could be inevitable to facilitate growth in the construction industry as a contract can be agreed with the actual cost being kicked down the road into the ballpark, allowing for fluctuations and the influence of market forces.
This should be boom time for the construction industry and for some building companies and manufacturers, it undoubtedly is, but there are still plenty of challenges ahead as the materials supply shortage is predicted to continue until at least 2022.
As a manufacturer, we are empathise with the frustrations some contractors and developers are feeling. The work is there, but it’s not always possible to complete it in the normal timeframe because of a lack of materials. We have been working closely with our customers to offer as much security, flexibility, transparency and good news as possible, and will continue to invest in infrastructure and supply chain throughout 2021.