Rising Prices of Raw Materials
Price increases of nearly 40% for steel, 51% for aluminum, and even 80% for certain types of wood… In Belgium, four out of five companies are affected by the wood shortage. Two-thirds report delays of two weeks, and one-third delays of at least a month. Prices are climbing and lead times are extending. The construction sector is struggling to meet the strong post-COVID demand. This disruption stems from the backlog accumulated by many global factories during the crisis.
In recent months, the prices of raw materials have continued to soar, causing chain reactions in the pricing of all construction materials. PVC, paint, and polyurethane foam, often used in insulation projects, are now significantly more expensive. “Even bricks and cement are now affected. Nearly all products have seen medium to very high price increases,” explains André De Groote, president of FEMA, the Federation of Construction Material Traders. This also impacts structural work.
Ultimately, it is the finished products that bear the brunt. “If aluminum prices rise, so do your window frames. The rise in wood prices also increases the cost of pallets used for transporting goods, and thus transport costs in general. Recently, I spoke with a contractor who uses small steel nails for fixing drywall panels. A box that used to cost €300 now costs €500,” says Véronique Vanderbruggen, spokesperson for the Construction Confederation. This field example illustrates a very global problem, rooted in production delays around the world. Many factories shut down or scaled back production in anticipation of declining demand when the pandemic hit. Restarting has been slow, and they are still struggling to catch up.
The virus also disrupted global maritime transport, with ships stuck in ports around the world. The supply chain had to restart amid unexpected events like the March blockage of the busy Suez Canal. Meanwhile, demand exploded. Across the globe, stimulus plans mobilized construction workers and private individuals, many of whom invested in their homes after experiencing the joys of lockdown life.
The Example of Wood
Each material faces its own specific issues. Take wood, for example: prices for most types surged at the end of 2020. “This is mainly due to high demand from the United States, where the construction sector increased output by 25% last autumn. And there, building with wood is standard. Another issue, also from the U.S., is a decision by Donald Trump to tax Canadian lumber. As a result, Americans turned to the European market, deepening shortages here,” explains François De Meersman, secretary general of the Wood Confederation.
Wood prices remain high but are slightly decreasing this July. “It seems the situation has improved in the U.S. in recent weeks. We might soon return to a somewhat more normal scenario in terms of prices and availability.” What about other materials? “A price increase of 11% for insulation has already been announced for September. Steel is expected to remain high and may increase further next year. Prices vary by product and are very uncertain,” says André De Groote. (Source: Le Soir – Cécile Danjou, August 6, 2021)
The situation is particularly complex in the wood sector. Raw material prices are exploding, and delivery times are increasing. 80% of Belgian companies active in the wood sector are affected by shortages. This situation was largely triggered by one of Donald Trump’s final decisions as U.S. president.
Prices Have Doubled at a Wood Distributor in Namur
We visited a wood retailer in Namur. Spruce, oak, OSB, wood wool, multiplex – prices continue to rise. We spoke to a customer taking advantage of the holidays to enhance his terrace. “We know it’s gone up. We know it’s more complicated, but we adapt and make do with what’s available,” says Pierre-Antoine.
Donald Trump’s Decision + Rising Demand = Shortages and High Prices
One of the main explanations for rising prices lies with the United States. A tax imposed by Donald Trump on Canadian wood during his final days in office forced Americans to buy from Europe—right when demand here was resurging. “Especially from Scandinavian countries, where prices were very high. That drove up our market too. Add to that a surge in demand, and the result was prices doubling,” says Stéphane Scaillet, manager of the wood store we visited. Take flood victims, for example—they have no choice but to rebuild now, even at today’s inflated prices.
This shortage comes at a particularly bad time for some private individuals. “I’m worried about the middle class—they’ll struggle to afford these materials. Flood victims, for instance, must rebuild immediately and are stuck paying the high prices of today,” adds Stéphane Scaillet.
In Belgium, four out of five construction companies are affected by this material shortage. Two-thirds face delays of two weeks, one-third of at least a month.
Source: RTL – Mathieu Langer, Denis Caudron, published on August 8, 2021 at 2:53 p.m.
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