Construction costs rise again in April as inflation continues to push up wholesale prices

THE PRICE OF BUILDING AND CONSTRUCTION MATERIALS HAS RISEN BY MORE THAN 18% ON AVERAGE IN THE 12 MONTHS THROUGH APRIL, according to new figures from the Central Statistics Office (CSO).

But wholesale electricity prices fell more than 25% last month as global natural gas prices stabilized after initially rising following the Russian invasion of Ukraine in late February. However, electricity prices are still 155% higher than in April 2021, according to the figures.

Overall, the Wholesale Price Index (WPI), which tracks the prices manufacturers and growers charge other businesses for their products, rose 5.2% in April from the same month in 2021.

That’s an increase from March, when the annual rate of growth of factory-gate prices reached 4.4%.

The price of a basket of building and construction materials increased by 3.1% between March and April, compared to a rate of 1% between February and March.

It means that the prices of construction inputs increased by 18.1% in the year to April.

Structural steel and fabricated metal prices, which increased 42% and 38.5% respectively during the year, increased 27.6% and 34.1% between March and April.

Globally, the price of steel had already soared in 2021 amid supply chain bottlenecks and as economies reopened and construction projects restarted. But the war in Ukraine, which along with Russia is one of the world’s largest steel producers, has pushed prices up further in recent months, although there is some evidence that upward price pressures have begun to dissipate in the last weeks.

Cement prices, which have risen 14.6% in the past 12 months, rose 6.4% in April, while stone, sand and gravel are up just over 10% from April 2021.

Construction companies have warned in recent weeks that the sharp drop in prices is pushing companies to the brink and threatening the viability of public works projects.

In response, the Cabinet approved a new Inflation Framework scheme, intended to protect companies involved in the delivery of new schools, roads and other public contracts from the threat of rising input costs.

It will see the state foot the bill for up to 70% of builders’ inflation costs related to projects that have started since January 1 and could cost the treasury between €30 million and €40 million during the first three months of the year, according to Minister for Public Expenditure Michael McGrath.

Commenting on today’s CSO figures, Paul Sheridan, Director of Major Contracting at the Construction Federation of Ireland, said: “The latest rise in the Wholesale Price Index figures will come as no surprise to anyone in the construction sector.

“It is very much in line with what we are seeing in the industry. There have been unprecedented levels of hyperinflation in building materials in recent months, making it increasingly difficult to price projects.”

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He added: “We are hearing that providers only provide price quotes that last one day, such is the level of flow in the market. As you can imagine, this creates a great deal of difficulty when it comes to accurately pricing construction projects, which by their very nature take a longer period of time to complete.”

“If the price of materials is growing 50% or more in a matter of months, how can you accurately price a job today that isn’t due for completion for two years?

“That is why it was essential that the Government introduce the Inflation Framework measures that were announced on May 10 by Minister McGrath. However, additional and urgent reforms of public works contracts are needed to incorporate these concepts into all future public contracts,” Sheridan said.

On the other hand, the WPI for April shows strong increases in the wholesale price of food products.

Overall, food producer prices rose 8.8% during the 12 months through April, with meat and fish products rising 17% and 7%, respectively.

Wholesale prices for dairy products increased by an average of 37% annually, while animal feed increased by more than 8%.

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