Why building materials are becoming more expensive

There has been a notable rise in the cost of building materials in Africa as well as across the globe. Some of the materials that have experienced a sharp price increase include paint, cement, and steel among other key materials. This realization has been prompted by a number of factors.

Inflation

inflation

The annual inflation rate recognized in the global economy is attributed to deviating prices of construction materials, some of which can be realized within a particular project life cycle. However, this is predictable in many cases and is usually accounted for by professionals in the construction industry.

The Construction Leadership Council (CLC) from the United Kingdom warned that inflation in the prices of materials had increased by 10-15% over a period of three months. The agency further forewarned of further increases in the cost of materials in the near future.

Such conclusions can be drawn from observing the energy crisis, which prompted a surge in the costs of steel, glass, cement, and other energy-intensive products. This is compounded by an increase in the price of raw materials realized around March of 2021 (Yorkshire Post).

Raw Material Shortages

building materials

There has been a shortage of key items such as steel, which has prompted industry groups and contractors to predict some slowing within the sector. These shortages are likely to affect the cost of building or purchasing new homes.

Russia’s onslaught on Ukraine has worsened supply fears resulting from the rapidly increasing array of Western sanctions. News reports indicate that the price of steel in the international market has moved up by nearly $135 per ton since the Russia-Ukraine conflict began in February 2022 (Business Daily).

Housing and construction industry experts estimate that Russia and Ukraine account for nearly 10% of global steel trade (Business-Standard). This is particularly challenging since steel is used to make fundamental structures like roofing sheets, beams, columns, reinforcement bars and windows and doors among other products.

Some of the shortages in building materials emerge from work stoppages and decreased productivity experienced by producers of these materials. These challenges in the workflow are prompted by government restrictions and health protocols realized in the wake of the Covid-19 pandemic.

Scarcity and Rising Costs of Energy

energy

Economies rely on fossil fuels and other forms of energy to transport building materials. The price of fossil fuels has become more expensive over the last few years and has thus affected the costs of transporting and distributing construction materials.

Experts have stated that the Russian invasion of Ukraine only compounded pre-existing issues revolving around energy costs (NBC News). Energy price pressures were already on the rise caused by a worldwide shortage of supplies before the European conflict emerged.

The Construction Leadership Council (CLC) further reports that energy bills increased by 54% in April in the UK. This puts additional pressure on construction stakeholders since energy-intensive industries that provide raw materials experience the impact of raised prices.

Supply Chain Disruptions

supply chain

The Covid-19 crisis caused disruptions in the form of decreased supply of building materials. This can be directly credited with the ensuing shortages and price surges. Many more economies will have to open up to recapture the supply that was being facilitated before the onset of the pandemic.

Factors affecting demand and supply are always central to the pricing of commodities and building materials are no exception. Some stability in both aspects ensures that the prices are equally stable. The ensuing instability is caused by factors such as financial strain and limited distribution.

Strong supply chain and demand issues worsened by limited distribution further contribute to inflationary pressure. There are further instabilities caused by unequal responses to the Covid-19 pandemic. Some regional clusters turned to “building back better” after the height of the pandemic, causing brief surges of demand for construction materials.

supply chain management

The Covid-19 pandemic reduced amounts of disposable income and significant savings that many people intended for building projects. This phenomenon was partially responsible for a distinct decline in demand for building materials.

Another impediment to the adequate global supply of wood results from the shipping bottlenecks at naval ports. Industry experts have cited the lack of storage containers, and fewer workers operating cranes to load and unload containers from ships (Prosertek). All these factors cause fewer ships to leave ports within a small amount of time, resulting in significant shipping delays.

The demand for timber continues to increase, thus applying pressure on the supply chain. Another challenge realized in this dimension is the productivity levels of sawmills in construction-intensive regions. The Covid-19 pandemic caused a shortage in workers which continues to plague the supply chain.

Environmental Factors

environment

The use of wood products in the building has been discussed at length in the construction industry considering the impact on the natural environment. There are many regulations in place to ensure the wood is sourced responsibly, and the adoption of the stipulated measures increases the cost of sourcing wood products.

Adding to the burdens of the imposed tariffs to protect the environment, adverse meteorological conditions have contributed to scarcity. Coastal wildfires have struck part of British Columbia and the U.S. West Coast, and torrential rains in the Canadian province late in 2021 disrupted key transportation routes for timber.

Conclusion

The steep rise in costs of building materials is likely to slow down the construction sector, potentially affecting a fragile economy that is yet to be fully restored from the economic downturn of the Covid-19 pandemic. These realizations make it clear that there is a need to find solutions to some of the challenges that have prompted the increase in costs to avoid further stalling of the sector. 



References

Yorkshire Post - https://www.yorkshirepost.co.uk/lifestyle/homes-and-gardens/the-rising-cost-of-building-materials-is-an-issue-for-the-construction-industry-and-homeowners-alike-3650413

Business Daily - https://www.businessdailyafrica.com/bd/markets/market-news/price-of-construction-materials-rise-sharply-3764634#:~:text=The%20prices%20of%20steel%20in,and%20doors%2C%20among%20other%20products.

Business-Standard - https://www.business-standard.com/article/economy-policy/russian-ukraine-war-impact-steel-producers-feel-a-new-pinch-in-india-122031701237_1.html

Prosertek - https://prosertek.com/en/blog/impact-bottlenecks-at-ports-international-transportation/

NBC News - https://www.nbcnews.com/news/world/why-russia-s-ukraine-invasion-spiked-energy-prices-4-charts-n1289799

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