Why is the Cost of Construction Materials Soaring?

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The cost of construction materials is continually soaring and has reached a record 40-year high, as per the annual growth of the BCIS Material Cost Index. 

The combination of logistical problems and increased global demand in the construction industry has resulted in huge shortages and delays, leading to increased materials prices. 

Inadequate number of containers and a shortage of workers at ports due to the Covid-19 protocol have further increased delays in material delivery and subsequently surged material costs.

Why is the Cost of Construction Materials Soaring?

1. Supply Shortages

The supply shortages are prompting companies dealing in building materials to increase the cost. This shortfall in material supply is mostly due to disruption in the supply chain, covid-related logistic problems, reduction in the number of port employees, lack of accessible shipping containers, and increased demand for building material.

In China, lockdowns have caused transportation and logistical issues because of highways that have been closed.

The third busiest port in the world stopped working for weeks due to the pandemic, leading to a shortage of shipping containers to deliver material on time. Cargo container stockpiling has increased cargo prices considerably, increasing the cost of materials.

After the lockdown, construction projects resumed, and many countries invested in infrastructure to revitalize their economy, leading to an increase in the demand for construction materials and, ultimately, the price of construction materials.

The recovery in global oil prices raised energy prices, impacting the cost of production of building materials. Salary raise, taxes, and exchange rates contribute to the increase in the cost of construction materials.

2. Production of Construction Materials

Manufacturers of building materials have suffered and continue to suffer work stoppages and decreased productivity because of government restrictions and health protocols. This is another factor that leads to an increase in the cost of construction materials.

3. Political and Trade Issues

In certain countries like the United Kingdom, political circumstances such as Brexit created confusion in the overall economic system and led to hikes in the cost of building materials. Around 56% of all imported materials in the United Kingdom are exported from Europe. So, it is clear how Brexit contributed to the increasing prices of materials in the UK.

The trade war between the United States and China has also increased the price of construction materials like steel. Moreover, trade disputes between Canada and the United States have increased lumber costs sharply, around 56%.

Another example of political dispute is the war between Russia and Ukraine, which has destabilized international markets, soaring energy and fuel prices while tightening the supply of major raw materials.

How to Stabilize Material Costs?

Certain strategies are available to contain the increase in material prices:

1. Optimize building design to use fewer materials.
2. Panelization can save materials and reduce wastage.
3. Technological advancement can improve the construction process.
4. Manufacturing in a controlled environment decreases material waste.
5. Harnessing construction project data to improve management and communication skills.

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