Recent global events have had a considerable impact on all businesses, but Australia’s construction and manufacturing industry appears particularly hard hit and is struggling to manage the volatility. Companies have collapsed, prices continue to rise, and skilled labour and materials are in short supply.
The price increases that manufacturers face are cascading through the supply chain and have truly begun to impact the end consumer.
“The construction industry has always been fast-paced, but the supply chain crisis and price volatility has made it even more difficult to manage, has increased stress and pressure on project teams and is really testing each business’ resilience,” said John Wallace, Fairview’s state sales manager – Victoria.
Transport and Supply Chain Challenges
It has been an exceedingly difficult period in supply chain and logistics, with terminal and port congestions causing excessive delays, which are not expected to ease in the near future.
In terms of local freight and logistics, increased fuel and AdBlue prices along with driver shortages are putting additional pressure on stock access.
What trends are we noticing?
- Customers are becoming more selective about which projects they are pursuing, choosing projects that they can be more confident of a successful completion.
- Project procurement is commencing almost 12 months earlier than we have ever seen before, to allow time to gather supplies and place orders.
- Contractors are scrambling to get hold of all supplies for future projects before their competitors. This has seen an increase in warehouse construction and rentals where these contractors are stockpiling supplies, and placing further strain on relationships between suppliers and loyal customers.
- Increased level of research into alternate materials.
- More collaboration between stakeholders to share the project vision and firm up a heathy supply of reliable resources. The view is to create resilient supply chains to achieve less fragmentation in the industry.
- Demand for skilled workers – the construction industry is in grave demand for skilled trades to guarantee that projects are completed on time, on budget, and in a compliant manner.
- Sourcing of materials closer-to-home to reduce reliance on importing.
- Internal focus on building trained and resilient organisational cultures where staff are engaged in resolving problems and are given time and training to develop innovative thinking.
Joe Bousquin, senior reporter of the Construction Dive reports: “Supply shortages, worsened by surging demand, have led to the largest annual spike of input prices to construction since 1987, when data collection began”.
Drivers of Product Price Volatility
Many product suppliers within the construction industry are contending with aggressive cost pressures associated with the price of aluminium. This has been driven by several factors:
High USA and global demand generally for aluminium: This is particularly a result of government efforts to kick-start economies post-COVID. International aluminium stocks are now at critically low levels.
Increasing input costs: Energy costs are about 35% of the cost of manufacturing aluminium. Europe and China have seen significant increases in the cost of energy. Additionally, a coup in Guinea late last year and recent export restrictions in Indonesia have increased supply risk and cost of Bauxite, the main commercial ore for aluminium. Bauxite is about 25% of the cost of aluminium.
Reduced global production: Despite high aluminium pricing, high energy costs have forced several smelters in Europe and China to shut down or significantly reduce capacity in recent months. Emission targets in China are further limiting production capacity, and China is now a net importer of aluminium after having been a net exporter for decades.
Ukraine crisis: Russia is the third largest aluminium producing country after China and India. While there are no sanctions on Russian aluminium specifically, the overall sanctions are significantly impacting their ability to do business with other nations, driving up aluminium and energy costs. Ukraine refineries supply about 20% of the Alumina for Russia.
Aluminium pricing has increased considerably since 1 Jan 2022; unfortunately there appears to be little to prevent ongoing price volatility caused by these drivers.
In light of price pressures, some contractors are opting for on-site painted fibre cement. While it helps to achieve a cost saving, this is an enormous compromise on the aesthetic and performance of the façade when there are many cost-effective alternatives available.
With Vitracore G2, there is no compromise on design. Vitracore G2 uses the tried and tested specialist technology PPG coating system so it is available in the same extensive colour range as Fairview’s leading solid aluminium panel, Vitradual.
Vitracore G2 also contains 50% less aluminium than solid aluminium products and is thus, not as heavily impacted by price fluctuations. Vitracore G2 is the most stringently tested product of its kind, is 100% safe and compliant, deemed non-combustible and is the perfect product for both new builds and to replace combustible cladding.
The limitless range of finish options, including solid, metallic, and multi-layer finishes such as spectra, chromatic, woodgrain, brushed, and natural look, is unmatched and provides you with a solution for any design intent.
In addition, Fairview supplies a range of non-aluminium products including:
- CeramaPANEL – through-coloured fibre cement panel (QLD and VIC)
- Vitraloc – roll-formed steel
- Argeton – terracotta ventilated façade system
- Equitone – through-coloured fibre cement (NSW and ACT)
We are committed to helping you make confident cladding choices.
To learn more about Fairview’s range of solutions, order a sample or discuss what the industry’s supply and price challenges mean for you and your project, please contact our friendly team.