A year on from the first EBOSS construction supply chain report for New Zealand it’s clear that while supply circumstances are improving, the industry is still facing continued cost increases. Source: Timberbiz
As an example, structural products now have a lead time of eight weeks, down from 11 weeks in January. The industry still has the same constraints however, they have been mitigated through an increase in domestic warehousing, more efficient port operations and domestic freight efficiencies.
The 2022 EBOSS Construction Supply Chain Q3 Update highlights that while some pressures impacting the market appear to be improving, the price of building products sold in New Zealand has increased 32% on average over the last 12 months, and suppliers are predicting a further rise of 9% over the next six months.
Matthew Duder, managing director of EBOSS says that construction costs for new homes are set to increase further despite demand beginning to soften, with continuing international cost increases and pressure to have more product on hand leaving building product suppliers taking on even more risk.
“The 2022 EBOSS Construction Supply Chain Q3 Update shows that the New Zealand building industry is still facing significant challenges when it comes to the cost and supply of building materials,” he said.
“Almost all suppliers (95%) report that rising freight costs are creating inflationary pressures on their business, while 63% say this increased cost is impacting their ability to supply the market — down just 4% from July 2021.
“And while global supply chain issues have eased a little, 83% still say they are experiencing international freight issues.
“Add to that rising overseas material costs — the biggest inflationary pressure cited by suppliers — and the cost of New Zealand building products has nowhere to go but up.”
Mr Duder adds that the New Zealand building industry is heavily dependent on international supply with 90% of building products either sourced as finished products or reliant on components from overseas.
Over the last year, sell prices of building products have increased by an average of between 28–33% (category dependant) with structural products showing the largest increases.
This latest update shows that there are more cost increases to come. These increases have made it tough going for the industry, and suppliers are certainly feeling the pinch.
The full cost increases experienced by suppliers haven’t been passed through to the market, and suppliers are running on low margins at a time when they’re holding far more stock in order to meet market demand.
In July last year suppliers were asked what the response should be to supply chain issues as an industry. The number one answer was more planning ahead on the part of architects and builders.
Demand is likely to slow in reaction to inflationary pressures, but there will be price increases and the need for thorough forward planning on projects.
Download the report here.
