Are building material costs blowing out your bottom line? Find out how material shortages are eating into Australian construction businesses margins.

There’s no secret that the Australian construction industry has been heavily impacted by the increased costs of building materials.

A Lot of builders are expecting the costs to become worse before it becomes better. In 2021, timber prices increased in between 50 – 100 per cent, steel increased by 30 – 60 per cent and concrete increased by 20 – 40 per cent. These three items are the main elements for the structure of a building. Master Builders reported in the first quarter of 2022 that the cost of building materials increased by 4.2% with no signs of slowing down.

See below some examples of material cost increases:

Credit : Master Builders Australia

Over 2019 to 2022 there has been and currently is a perfect storm for material cost increases:

Environmental causes

• The Black Summer fire in 2019-2020 was a megafire, the fire burnt an estimated 14.3 million hectares. Included in the losses were several pine timber plantations which affected the supply drastically
• The floods in New South Wales & Queensland which destroyed homes and agricultural livestock. These are the worst floods Australia has faced since 2011

Global logistical causes

• The increase in shipping costs. 40 foot containers were priced at $2,500.00 US dollars in 2019, now in 2022 they cost $10,000.00 US which increases the cost to import goods in to Australia
• Shipping ports had closed due to the lockdowns which delayed the number of containers being able to be shipped from ports all over the world
• Worldwide shortage of shipping containers
• Worldwide lockdowns which slowed down the production of materials. Recently Shanghai which is a city of 26 million people was locked down from March to May which sent shockwaves globally and disrupted supply chains

Australian Government causes

• Government Home builder schemes which increased the demand for new residential construction which meant that the builders and trades were busy with the increasing number of projects to construct but were also paying exorbitant prices for building materials which decreased their profit margins
• The labour shortage, with a pause from the Australian government on international immigration it has led to states having to compete among themselves for limited talent available.

The Russia & Ukraine war

• The Russia & Ukraine war has severely impacted the cost of living in Australia. Russia was a major exporter of structural and formwork LVL’s to Australia, now Australia’s largest timber suppliers are scrambling to find alternative suppliers that supply Australian standard compliant LVL’s.
• The increase of fuel and transport costs. Russia is one of the largest exporters of fuel and with majority of the world boycotting their fuel, it is no surprise that every Australia feels the impact every time they go to a bowser at their local petrol station

The building materials pricing crisis is far from over.