The construction sector in Ireland is bracing itself for materials shortages as the perfect storm that has been the last eighteen months continues. The Irish Times amongst others are reporting on the various reasons behind this.
On the domestic front, the return to work of the construction sector after a lockdown since the new year has kick-started demand for a whole variety of products, including timber.
Timber is facing a particular shortage and price hikes in Ireland due to objections and delays in issuing of felling licences to fell trees in the country. This has led to less timber being produced than was expected, fuelling an increase in timber costs well in excess of inflation in the sector generally.
Other items, such as insulation boards commonly used in Irish home construction, have been affected by issues farther afield. One of the core components of insulation is a petroleum product of which the supply has been interrupted due to oil production in the Gulf of Mexico being halted as a result of bad weather.
Covid has left its own mark. A downturn in the amount of work done in the sector globally in the last year to 18 months has resulted in a glut of demand being formed throughout the world resulting in unprecedented demand for raw materials. This is compounded by spending by government on infrastructure, such as the €1.9 trillion recovery plan recently launched in the US to kickstart their economy following the Covid 19 pandemic. All of these things have resulted in huge additional strain being placed on supply of materials all around the world.
Some suppliers and manufacturers cannot cope with demand. Earlier in the month the United Kingdom’s second largest steel producer, British Steel, closed its order book indefinitely. This came without warning or notice and was as a result of unprecedented demand. It is assumed the order book has been closed to enable a backlog of orders to be cleared. Such moves have already caused increases in prices as stockholders do not know when stocks can be replenished.
With the lifting of restrictions earlier this month in Ireland to enable a full return to construction, contractors and suppliers knew there would be a big demand on different materials. What could not be predicted, were the other factors that have influenced and exacerbated the problems that were coming as a result of pent up demand being unleashed with the reopening of the economy.
Brexit has also had its own part to play in the reshuffling of supply chains within the sector to a certain extent. These kinks have been worked out for the most part, however, with cross border protocols etc. being traversed by the industry relatively successfully. The situation however is certainty not helped by Brexit
The result of all of these issues is sure to be a summer and possibly also a winter of discontent ahead for the construction sector. There are real fears that the housing needs and targets set by the government this year will not be met and if so this would partially be a result of materials shortages. One thing is certain, an industry just emerging from a famine due to lockdown is now creaking under strain of a different kind, and it may be under strain for some time yet.