Material prices to stay high in 2022, consultants forecast

A consultancy has warned that material prices will not fall this year, as supply chain problems and high production costs continue to hit the industry.

Distribution problems and high demand for materials will mean some pricing issues will not soften over the course of this year, according to Linesight.

A new report from the firm said that increasing energy costs are set to stop steel prices from going down, despite a slight dampening in demand.

“With an improvement on the input cost side in 2022 and more stable demand growth, [steel] prices are expected to reverse steadily,” it added.

Construction companies will also have to contend with timber prices continuing to jump with demand remaining high and rising gas prices hitting the production of lumber.

“[Timber] prices are not expected to fall significantly from recent highs, but improved supply chains and more stable growth in residential construction are likely to contain inflationary pressures,” Linesight said.

Timber Trade Federation head of technical and trade policy Nick Boulton said timber prices were being affected mainly by labour and logistics costs going up. He added that energy prices do not have that much of an impact on timber as it has a low energy cost.

He said: “Amidst a buoyant global construction industry seeking to rapidly decarbonise using sustainable, low-carbon products such as timber, supply may again tighten as we move into Q2 2022. Therefore, it is essential that customers and merchants continue to forward plan and keep strong lines of communication.”

Linesight UK managing director Michael Riordan said the Omicron variant of COVID-19 has meant the supply chain disruption is set to stay for at least a few more months.

“With current market conditions, advanced approaches to procurement and project management are essential,” he said. “This includes earlier engagement with the supply chain and closer management of supply chain relationships.”

Civil Engineering Contractors Association (CECA) chief executive Alasdair Reisner said the removal of the red diesel rebate in April will further hit the industry, which has struggled with cost pressures over the last year.

“We continue to work closely with our members, their supply chains, and the UK government to minimise cost pressures, and ensure that the substantial pipeline of infrastructure work that exists will be delivered on time and on budget,” he said. “Early supply chain involvement is certainly an area which can minimise costs, but we are working across all areas to optimise the business environment for CECA member companies.”

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