INDUSTRY NEWS
GORDON BEST, REGIONAL DIRECTOR MPA NI, ON THE RISE OF RAWMATERIALS COST AND SHORTAGES… Unprecedented increase in material costs and shortages
T he recent Ulster Bank PMI survey revealed again an all too familiar story of inflationary pressures and lengthening supplier delivery times. Within the UK, Northern Ireland continues to report the steepest rises in input costs, with local firms raising the prices of their goods and services at faster rates than any other region. Price pressures linked to raw materials, fuel, freight, wages and Brexit continued to be cited by survey respondents. So why is this unprecedented increase in material costs and shortages happening and when is it likely to end? GLOBAL CONTEXT In January 2021, the Carbon price sat at around £35 per tonne; at the end of September it’s sitting at £65. Expectation is that it could rise to £100 per tonne by June 2022. The cost of shipping a container from China to Europe have risen from £1,500 to almost £14,000 since January 2021. Wholesale prices for gas has risen 250% since January, and 70% since the start of August. 60% of UK Natural Gas is imported. Oil - up from $40/barrel this time last year to $74/barrel, + 85%, and set to remain at $70+ to year end. Gas Oil - linked to oil, up over 40% since same time last year. Furthermore, impact of red diesel changes from April 2022 will see doubling in price. All of the above feed into the construction supply chain and will continue to make the cost of supply of cement, bitumen, aggregates, admixtures, pigments and transport extremely volatile. UK IMPACT The construction materials shortage can, in part, be traced back to increased building and home improvement activity in 2020, particularly during the first lockdown. This led to a slowdown in the production of materials from some factories in the EU, and supply chains have remained stretched ever since. But while construction output reached a
24-year high in June, demand is not being met by supply, and suppliers’ delivery times have lengthened. WHICH MATERIALS ARE AFFECTED? There has been a nationwide timber shortage since the first lockdown in March 2020, and imports remain an issue, against a backdrop of high demand for wood and wood products. Steel is in high demand globally, and shortages could persist until the end of the year. British Steel recently stopped taking orders on structural steel sections due to “extreme demand”. Roughly half of National Federation of Roofing Contractors members reported a shortage of concrete roof tiles earlier this year. Lead times for concrete tiles are between 20-36 weeks, on average, while lead times for clay are between 4-8 weeks. Supplies of bagged cement have been strained since late last year, and Pal Chana, Executive Director of the Mineral Products Association, warned in July that supplies will not return to normal until the end of the year. Certain electronic components, caused by a shortage of raw materials, could extend into next year and supplies of paints and sealants to the UK are restricted due to a global shortage and cost of shipping containers. There was a severe plaster shortage earlier
this year, and while supplies improved earlier this year, plasterboard has been subject to extended lead times, the CLC said in June. LOCAL DATA FROM MPANI MEMBERS Price increases we have experienced over the last three years: • Cement +15.91% per tonne • Aggregates +14.2% • Steel - Coil/rebar +48.1% /Pre-stressing strand +39.2% • Labour costs +19.6% There was no accurate figure for the haulage, but again it would easily be over 15%+. One local company with a turnover of approx. £40million has reported that, based on the same workload volume, revenue would need to increase by up to £2million in the next 12 months to cover increased labour, energy, materials and insurance costs known at this moment in time. The MPANI is the principal trade association for the quarrying and quarry products industry in Northern Ireland affiliated to the Minerals Products Association (MPA) in the UK.
For further information, call: +44 (0)28 9082 4078 or email info@mpani.org
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