Material prices stable but Middle East crises threaten inflation

Material prices are remaining stable or falling slightly but crises in the Middle East threaten to inflate products including plywood and semiconductors, the Construction Leadership Council (CLC) has said.

In its latest update, the CLC’s Material Supply Chain Group said 2024 continues to see “good product availability”, with reduced construction workloads easing pressure, particularly for materials used in the worst-hit housebuilding sector.

The group said risks to product prices posed by disruption in the Red Sea – where Yemen-based, Iran-backed Houthi rebels continue to target commercial ships – are “yet to materialise”.

However, it added that delays of 10-15 days have already hit construction materials shipped from Asia, such as decorative sandstone, plywood and sheet materials, hand tools, ironmongery and electrical goods.

“The main concern here relates to five-fold price increases stemming from increased shipping and container costs for these products,” the statement said.

It added that the conflict in Israel and Gaza could also “add further pressure on supply” of semiconductors – which has already been stretched since 2020 – and may “lead to increased prices”.

Israel is a significant exporter of semiconductors, having four major semiconductor design and manufacturing facilities.

However, the group said that there is a “good availability of aggregates, cement and concrete” and a “plentiful supply of steel”, albeit with the supply chain for the latter suffering “financial strain due to the downturn in demand”.

The group said large housebuilders are not anticipating an increase in output in the second half of 2024, while regional medium-sized housebuilders are struggling with a lack of availability of small sites.

It added that demand for aggregates and steel is not expected to pick up until 2025 despite the UK’s pipeline of infrastructure projects.

The CLC statement also said there are “concerning reports that late payment for materials is creeping up in a number of regions” and obtaining trade credit is becoming an issue for material merchants.

“Firms complain of coverage costing more and being reduced or withdrawn as insurers become more nervous about the level of construction insolvencies,” it added.

The co-chairs of the Material Supply Chain Group – John Newcomb and Peter Caplehorn, chief executives of the Builders Merchants Federation and Construction Products Association respectively – are due to meet the Association of British Insurers to discuss the issue.

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