Energy and transport crisis pushes cost of steelwork up by further 17%

Research released today by Southern Construction Framework (SCF) reveals yet further hikes in materials costs, with the added energy and transportation crisis creating a perfect storm of limited raw materials supply, products and labour.With the cost of steelwork up by a further 17% in the last three months alone and 38% over the last 12 months, contractors warn that the volatility of the market means that the supply chain can no longer forecast and fix building costs.

SCF is a leading construction procurement framework delivered by the public sector for the public sector in the South of England. Its latest quarterly report is based on data from July to September 2021 in partnership with its Main Contractors (BAM; GallifordTry; Isg; KIER; mace; midas; Morgan Sindall; Sir Robert McAlpine; Wates; Willmott Dixon).

In this quarter’s report, SCF’s Main Contractors have described the market volatility and the rate of price increases as ‘truly unprecedented’, with some referring to subcontractors fixing prices for just 24 hours, making planning across the industry impossible.

For Q3 alone, SCF’s Main Contractor’s supply chains have reported an average building cost increase of 12% across all trades – due to a combination of inflation rates across numerous products and materials. The price of some raw materials, specifically metals, has continued to impact on the building costs of many trades and products.

Trades that have seen the greatest increase in Q3 when compared to the previous quarter include Steelwork (17%); Carpentry & Joinery (16%); Curtain Walling & Dry Lining (14%); Windows (13%).

Over the last 12 months the greatest annual building cost increases have been found in Steelwork (38%); Dry Lining (18%); M&E (16%); Carpentry & Joinery (15%).

Kingsley Clarke, SCF Operations Lead said:

“The cost of steelwork has shot up in the last year and in the next quarterly report due out in December, this is likely to be up again, given British Steel’s new surcharge in response to the mounting price of gas and transportation. Whilst it is temporary, a £30 per tonne price increase on already inflated costs is the last thing that contractors need in addition to all the additional knock-on challenges of materials and labour shortages and rising salaries.”

This quarter’s report also reveals the impact on material distribution of the lack of HGV drivers from a reduction in European workforce, compounded by the misplacement of global shipping containers and the cost of petrol rising sharply, recently hitting an all-time record.

The knock-on effect is that trades have experienced an even greater increase in material and labour lead time during Q3 when compared to the previous year.The trades most impacted are Steelwork (additional 7 weeks); Brickwork, Dry Lining and Tower Crane (additional 4 weeks); Curtain Walling, Groundworks & Windows (additional 3 weeks).

Adam Sanford, SCF Operations Lead added:

“There is no easy way to solve the problems we face, but early collaboration is one way to help mitigate some of the crippling issues facing the industry. Early engagement with the Main Contractor means you can work together to ensure that design solutions incorporate current market pressures before detailed design. For SCF projects, our Main Contractors are committed to sharing early advice, even prior to appointment.

We also recommend a transparent approach to project budgets, risk allocation and pricing to ensure an environment in which market risks can be effectively managed and mitigated, reducing uncertainty in procurement, and increasing certainty on costs.”