Supply chain issues?
21 February 2024
The first report of the year from the Construction Leadership Council’s (CLC) Material Supply Chain Group (formerly Product Availability Group) shows 2024 starting in the same way that 2023 ended, with good levels of product availability and prices remaining flat or falling slightly.
John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association who co-chair the Group, report an ongoing easing of pressure on product availability, largely been driven by reduced demand, with those supplying housebuilders the worst hit.
New housebuilding continues to be held back by high interest rates and planning challenges, their report states. Larger builders do not anticipate a second half upturn at this stage, while regional mid-capitalised builders cite the availability of small sites as their number one concern but expect to maintain current output levels throughout the year.
Any risks to product supply from the disruption in the Red Sea related to the Israel-Gaza conflict are yet to materialise, the Group says, but it is monitoring the availability and cost of supplies from the Indian subcontinent and Asia such as decorative sandstone, plywood and sheet materials, hand tools, ironmongery and electrical goods.
A longer sea journey of 10-15 days has led to delays in deliveries and the main concern relates to five-fold (yes, five-fold) price increases stemming from increased shipping and container costs for these products.
The Group is also monitoring the supply of semi-conductors, which has been under pressure since the start of the pandemic. With four major design and manufacturing facilities in Israel, the conflict has the potential to add further pressure on supply, and lead to increased prices.
On a more positive note, brick manufacturers have adjusted capacity to meet anticipated demand for 2024, while balancing stock levels, and the Group reports good availability of aggregates, cement and concrete, with demand not forecast to markedly improve until 2025 in spite of the current pipeline of infrastructure projects.
There is also a plentiful supply of steel, but the supply chain is under financial strain due to the downturn in demand.
There are clearly many factors affecting the economic outlook. For example, the RAC reports today that fuel prices have risen recently following the attacks on tankers and shipping in the Red Sea. However, Bank of England governor Andrew Bailey has suggested that Britain is showing signs of recovery from its mild recession and will receive a boost when interest rates start coming down later this year.
So business executives must remain vigilant and be prepared.
Photo shows a colourful array of shipping containers. Credit: Tom Fisk/Pexels
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