Challenging times ‘far from over’ as commodity prices to stay high

Rampant construction commodity prices show little sign of easing, according to a new analysis.

Construction consultancy Linesight says in a new report that although the across-the-board hyperinflation experienced last year is now over, prices are set to remain high, driven by the cost of energy and a lack of required skills in the worldwide supply chain.

The UK-focused analysis highlights the cost of bricks and plasterboard, which are predicted to increase by 11.5 per cent and 10 per cent respectively this quarter as a result of high production costs.

Strong demand for concrete and cement combined with high energy costs will keep prices elevated, it said, with a 1 per cent increase this quarter forecast for both materials, although a decline in construction activity is predicted to bring down costs in the following quarters.

Despite a downward trend for steel at the end of 2022, the price of key raw materials combined with energy costs and their impact on production are set to keep prices high.

The outlook for copper prices is mixed as, despite increases in the fourth quarter of last year, concerns over global recession persist.

However, the report notes that lumber prices are continuing to fall, with a 1 per cent reduction expected for this quarter due to healthy stock levels and an anticipated drop in construction work.

Although supply chain infrastructure is now stabilising – partly thanks to China’s relaxation of its zero-COVID policy – shortages of specialist skills within the construction sector are causing ongoing disruption, it adds.

Michael Riordan, managing director of Linesight UK, said that with a 1.9 per cent contraction predicted for the UK construction industry this year, the challenging times are “far from over”.

“Although supply chains may be up and running at pre-pandemic levels, over the coming year, the construction sector will still be faced with rising interest rates, high energy prices, a scarcity of skilled labour and unreliable global conditions,” he said.

A key strategy for minimising risk would be relationship-based supply chain management, Riordan added.

Earlier this week, an analysis from the Construction Products Association found that demand for heavy materials such as steel, bricks and timber had continued to fall in response to a slowdown in the new-build sector.

In contrast, light-side manufacturers recorded a 10th straight quarter of rising product sales.