LONDON (ICIS)--Europe’s construction sector is challenged by shortages in supply chains pitched against the rising demand, which has built up as lockdowns ease across the continent.
In Germany, producers in the construction sector are struggling with record-breaking bottlenecks in procuring materials, researchers at the Ifo Institute said on Monday.
In April 23.9% of companies in building construction surveyed by the Ifo stated that they had problems getting materials in on time, up from 5.6% in March.
Tight supply was also reflected in the civil engineering segment, with 11.5% of companies recording a shortage of materials, rising from 2.9% in the previous month.
"This has been an unprecedented bottleneck since 1991. Apparently, in April this resulted in at least a temporary impairment in construction activity," said Ifo survey expert Felix Leiss.
Rising prices and logistics issues have impacted products including structural steel, timber and plastics, insulation materials and foils.
The pandemic capped capacity for producers, but demand has recovered faster than anticipated as the recent wave of infection rates has been managed.
While supply chains had already faced pressure from the pandemic, other issues including the polar storm in the US have caused disruption including lumber production, processing, and transportation.
Increased demand in the construction sector is not contained to Germany, as banking firm Credit Suisse cited that in the Republic of Ireland, house price inflation (HPI) for March rose 3.7% year-on-year.
This marks the highest year-on-year rise since February 2019 and is the seventh month in a row of rising house prices, with Credit Suisse expecting an acceleration in year-on-year growth.
The UK construction sector is also heating up, with Credit Suisse citing strength in the country's private private sector as a driving factor in helping construction companies meet earnings expectations in the second half of the year.
“As seems to be the case every time we get new house price data for the UK, metrics have pointed to a further acceleration of momentum into April,” the Swiss bank said in a credit note on Monday.
This has been spurred the UK government lifting the threshold for Stamp Duty – a tax levied on properties purchased over a certain value – to stimulate the nation’s housing market.
Data from the country's Royal Institute of Chartered Surveyors (RICS) marked the highest increase in price balance for April since 1987, with sales to stock increasing 56%, the highest record since October 2002.
The UK’s Construction Leadership Council has put together a product availability group to alleviate bottlenecks and is urging members to plan procurement early so as not to suffer with shortage of materials.
Timber, roof tiles and roofing membranes continue to be the worst affected products, with supply anticipated to remain tight throughout this year, as global demand outstrips supply.
Constricted markets in the chemicals sector have affected supply in the UK’s construction industry, with the CLC citing shortages of polyethylene (PE), polypropylene (PP), polyurethane rigid foam (PIR), paints, adhesives and other coatings as well as packaging for other product groups.
“Evidence suggests a positive pipeline of work ahead, including a high level of contracts awarded during the first quarter. With full order books, the current level of active demand across the entire construction industry will continue to put increasing pressure on the product supply chain,” the CLC said in a statement.
“In general, products are available but lead times have lengthened. Current demand is such that it is proving difficult for manufacturers and suppliers to build up stock levels.”
Focus article by Morgan Condon
Thumbnail picture: Construction work on Notre Dame Cathedral, Paris. Photo by Benoit Tessier/AP/Shutterstock