A statement was released by the Construction Leadership Council’s Product Availability Group. The group is co-chaired by John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association. The statement outlines the current accessibility and availability of products as we move into the fourth quarter of 2022. All regions are reporting the best product availability in two years, both in the range and volume of products available and delivery/lead times.
Availability of bricks has significantly improved and deliveries of aircrete blocks are being managed. Aircrete block manufacturers report strong sales of foundation blocks. Historically this leads to increased sales of above ground blocks 4-6 weeks later. This year there is less correlation, and the increased below ground activity is likely due to builders seeking to get new starts registered before changes in Part L regulations next June.
While longer delivery times for gas boilers remain and early ordering is recommended, availability is more positive than for some months.
The situation is somewhat different for electro-technical products which continue to be affected by the restricted supply of semi-conductors. Now, with rising interest in products related to energy saving, renewable energy production, storage and heating, there are further concerns over both availability and price escalation for electrotechnical products that may impact both the construction and facilities management sectors.
Although many construction sectors remain resilient and infrastructure and housebuilding activity has remained strong, there are early signs of softening in demand. This is most clearly seen in the home improvement sector where the rising cost of living and increased costs of finance are denting consumer confidence, but also in a reduction in the number of large commercial construction contracts being placed.
Softening demand has led overall product price inflation to moderate slightly, dropping from 25% to around 17%. Nonetheless, concerns remain over inflation tied to energy costs for manufacturers, despite the Energy Bill Relief Scheme announced by government last month and the fact that many manufacturers have already hedged energy costs. The concerns are greatest for energy intensive products such as bricks, blocks, glass, steel, cement and ceramics that have already seen sustained price increases during 2022. Some suppliers have already announced further increases from January.
Timber prices have fallen and there is plenty of stock on the ground, especially standard softwood sizes. There are, however, gaps in speciality markets such as birch plywood, which is affected by sanctions against goods from Russia. Anyone sourcing birch plywood should request full due diligence documentation to ensure it is legally sourced from Finland and Latvia. We are aware of cheap birch plywood coming from China and Vietnam, where there are no birch forests, and is likely sourced from Russia. Russian birch logs processed elsewhere cannot be legally sold in the UK.
Availability is not an issue for steel but rising rebar prices may be, again due to increased energy costs throughout Europe. This has led to importing products from more unusual markets including Egypt, which may be of lesser quality. The EU has also banned the import of semi-finished steel product from Russia, which may affect the availability of some steel products, particularly steel plate.
We note that shipping and logistics costs, capacity constraints and delays remain problematic but appear to be easing, though this is still very volatile depending on the products, countries and mode of transport involved. For example, in general container shipping prices from Asia to the UK have dropped over 50% since January and punctuality has improved. That said, the consensus amongst industry analysts is that high oil prices, strained global infrastructure, labour issues, Covid shutdowns in China and the war in Ukraine will cause logistics-related problems to persist and costs to remain elevated for the foreseeable future.