Germany’s construction sector hit by supply shortages

LONDON (ICIS)–The German construction sector is hampered by a shortage of materials and escalating purchase prices, according to the ifo institute on Thursday.

When surveyed in June, 95.2% of survey respondents agreed that purchase prices had risen in the previous three months, an increase on the previous month.

Supply chain constraints also got worse in June, with 50.4% of companies in the building construction sector confirmed disruptions due to delivery delays – up from 43.9% in May and 23.9% in April.

In the civil engineering segment, 40.5% of those surveyed acknowledged logistics issues in June, rising significantly from 33.5% in May. In March only 2.9% of companies struggled with supply issues.

“The supply of lumber is still a major issue on German construction sites. But petroleum-based building materials are also in short supply,” said Ifo survey expert Felix Leiss.

“In many places, there are shortages of synthetic insulation materials, drainage pipes, and other plastic parts. On top of that, there are delivery problems and price increases for steel,”

The European polyvinyl chloride (PVC) market has seen higher prices as sustained demand is pitched against constrained supply.

In construction, PVC is widely used for applications such pipes and profiles.

“The market is still longing for material, customers are desperate,” said one European PVC producer.

“The markets are booming construction markets you are hardly getting craftsmen or material. The only block is human resources and some feedstock. Wood and plastic are missing.”

Another producer stated that while there is buy-side resistance to higher pirces, the underlying fundamentals in the European market – strong demand and limited supply – have so far carried over into the third quarter.

They said: “Imports are not going to play a major role in the third quarter as logistics continue to be a big challenge, even the normally long lead times of 8 to 10 weeks, are now more in the range of 12 to 15 weeks.”

Front page picture: A construction site in Frankfurt in 2020
Source: Mauritz Antin/EPA-EFE/Shutterstock

Additional reporting by Chris Barker